A Firm Uses Only Debt and Equity in Its Capital

question 99

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of debt is 75 percent. The firm could issue new bonds at a yield to maturity of 12 percent and the firm has a tax rate of 30 percent. If the firm's WACC is 13 percent, what is the firm's cost of equity?

• A)38.29 percent
• B)36.00 percent
• C)26.80 percent
• D)4.00 percent

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Definitions:

Genetics

The study of genes, genetic variation, and heredity in living organisms, explaining how traits are passed from parents to offspring.

Unconscious Forces

Internal psychological processes and drives not within the conscious awareness that influence thoughts and behaviors.

Self-Identity Stage

A phase in development where individuals explore and solidify their sense of self and personal identity.

Extension-of-Self

The concept of external objects being perceived as part of one's identity or self.