Hey Guys!, Inc

question 59

Multiple Choice

Hey Guys!, Inc.has debt with both a face and a market value of $3,000.This debt has a coupon rate of 7% and pays interest annually.The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%.What is the firm's cost of equity?

• A)13.25%
• B)13.89%
• C)13.92%
• D)14.14%
• E)14.25%

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Definitions:

Aging Method

An accounting technique used to estimate the amount of uncollectable accounts receivable by categorizing outstanding invoices based on the length of time they have been due.

Dishonored

Refers to a financial instrument, such as a check or promissory note, that is not accepted or paid at maturity due to insufficient funds or other reasons.

Supplementary Record

A document or collection of notes that provides additional information beyond the core financial statements, offering deeper insight into a company's financial position.

Balance Sheet Methods

Techniques used in preparing and presenting the balance sheet, a financial statement showing a company's assets, liabilities, and equity at a specific point in time.