A Firm Has a Debt-Equity Ratio of

question 73

Multiple Choice

A firm has a debt-equity ratio of .64,a pretax cost of debt of 8.5 percent,and a required return on assets of 12.6 percent.What is the cost of equity if you ignore taxes?

• A)8.06 percent
• B)8.55 percent
• C)11.12 percent
• D)15.22 percent
• E)16.38 percent

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Definitions:

Superordinate Goals

Shared objectives that require two or more groups to work together, thus promoting cooperation and reducing intergroup conflict.

Reciprocity Norm

A societal rule that obliges people to assist those who have previously assisted them, encouraging reciprocal help and collaboration.

Social Trap

A situation in which individuals or groups make decisions that lead to a negative outcome for everyone, often due to conflicting short-term interests and long-term goals.

Self-Interest

Acting in a way that is beneficial to oneself, motivated by personal gain or advantage.