A Firm Has Zero Debt in Its Capital Structure

question 4

Multiple Choice

A firm has zero debt in its capital structure.Its overall cost of capital is 10%.The firm is considering a new capital structure with 60% debt.The interest rate on the debt would be 8%.Assuming there are no taxes,its cost of equity capital with the new capital structure would be:

• A)8%
• B)16%
• C)13%
• D)10%

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Definitions:

Peer Groups

Social groups consisting of individuals of similar age, status, interest, or backgrounds who tend to influence each other's attitudes and behaviors.

Structural Functionalists

Theorists who analyze society as a complex system whose parts work together to promote solidarity and stability, focusing on the social structures that shape society.

Émile Durkheim

A pioneer French sociologist known for his substantial contributions to the field of sociology, including his theories on social cohesion and the functional role of religion.

Functions of Deviance

The sociological concept that deviant behaviors can play key roles in society, including promoting social change, clarifying norms, and reinforcing social bonds.