A Firm Has a Debt-To-Equity Ratio of 1/4

question 19

Multiple Choice

A firm has a debt-to-equity ratio of 1/4.The WACC is 18.6%,and the pretax cost of debt is 9.4%.What is the cost of common equity if the tax rate is 34%?

• A) 19.90%
• B) 20.90%
• C) 21.70%
• D) 22.73%

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Definitions:

Pay Plan

A structure outlining how employees are compensated, including salary levels, bonuses, and increments.

Differential Piece Rate

A compensation system where workers are paid based on the quantity of work produced, with rates that can vary depending on performance levels reached.

Standard Hour Plans

Compensation packages that offer wages based on the number of hours worked, adjusted by efficiency or predetermined standards.

Piecework Plans

A compensation system where employees are paid based on the quantity of work completed, rather than on the number of hours worked.