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If a Firm Is Unlevered and Has a Cost of Equity

question 40

Multiple Choice

If a firm is unlevered and has a cost of equity capital of 12%,what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 9%.


Definitions:

Budget Deficits

A financial situation where a government's expenditures exceed its revenue over a specified period, leading to borrowing or debt accumulation.

Recessions

Periods in an economy when business activities reduce, leading to higher unemployment and lower spending and investment.

Inflations

A widespread rise in prices accompanied by a decrease in money's buying power.

Deficits

The amount by which a government, company, or individual's spending exceeds its income over a particular period of time.

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