A Firm's Return on Assets Is 12 Percent and the Cost

question 52

Multiple Choice

A firm's return on assets is 12 percent and the cost of the firm's debt is 7 percent.Given a 0.7 debt-equity-ratio, what is the levered cost of equity? Assume that there are no taxes.

• A)7 percent
• B)12 percent
• C)13.6 percent
• D)15.5 percent

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Definitions:

Industrial Revolution

A period of major industrialization that took place during the late 1700s and early 1800s, transforming largely agrarian societies into industrialized ones.

Agricultural Revolution

A significant period of technological, social, and economic change, marked by the shift from hunter-gatherer societies to agriculture and settlement.

Terrestrial Plants

Plants that grow on land rather than in water or air, typically exhibiting adaptations like roots for water absorption and leaves for photosynthesis.

Transpiration

A mechanism where water is transported from the roots up to minuscule holes beneath the leaves in plants, converting into vapor before being discharged into the atmosphere.