A Firm Is Unlevered and Has a Cost of Equity

question 76

Multiple Choice

A firm is unlevered and has a cost of equity capital of 9 percent.What is the cost of equity if the firm becomes levered at a debt-equity ratio of 2? The expected cost of debt is 7 percent.(Assume no taxes.)

• A)15 percent
• B)16 percent
• C)14.5 percent
• D)13 percent

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Definitions:

NMR Data

Information obtained from nuclear magnetic resonance spectroscopy that provides insights into the molecular structure, dynamics, reaction state, and chemical environment of molecules.

Triplet

In chemistry and physics, refers to a quantum state with three possible orientations in a magnetic or spin system.

Broad Singlet

A term in nuclear magnetic resonance (NMR) spectroscopy describing a signal that appears as a single peak but with a broadened width due to various intermolecular interactions.

NMR Data

Information obtained from nuclear magnetic resonance spectroscopy, used to determine molecular structure and dynamics.