A Firm Has an Expected Return on Equity of 15

question 64

Multiple Choice

A firm has an expected return on equity of 15% and an after-tax cost of debt of 6%.What debt-equity ratio produces a WACC of 12%?

• A) 0.50
• B) 0.75
• C) 0.67
• D) 0.33

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Definitions:

DAX

The Deutsche Aktienindex, a stock market index consisting of the 40 major German companies trading on the Frankfurt Stock Exchange.

German Stock Market

The stock market based in Germany, primarily represented by the Frankfurt Stock Exchange, where securities of German companies are traded.

Index

A statistical measure representing the change in a specified set of data points, often used in finance to track the performance of a group of stocks or bonds.