A Firm Has a Debt-To-Equity Ratio of 1

question 26

Multiple Choice

A firm has a debt-to-equity ratio of 1.75.If it had no debt,its cost of equity would be 9%.Its cost of debt is 7%.What is its cost of equity if the corporate tax rate is 50%?

• A)7.73%
• B)10.0%
• C)10.75%
• D)12.5%
• E)None of the above.

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Definitions:

Adults

Individuals who have reached the age at which they are considered legally responsible for their actions, typically 18 or older.

Percent

A mathematical term describing a number or ratio expressed as a fraction of 100.

REM Sleep

A stage of sleep characterized by rapid eye movements, during which vivid dreams commonly occur, and is thought to play a role in learning and memory.

Non-REM Sleep

A phase of sleep that includes all sleep stages except for REM sleep, characterized by slower brain waves and reduced eye movement.