A Firm Has a Debt-Equity Ratio of

question 69

Multiple Choice

A firm has a debt-equity ratio of .55 with a cost of debt of 6.7 percent.If it had no debt,its cost of equity would be 14.5 percent.What is its levered cost of equity assuming there are no taxes or other imperfections?

• A)18.96 percent
• B)15.82 percent
• C)17.94 percent
• D)18.79 percent
• E)13.67 percent

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Definitions:

Managerial Accounting

A branch of accounting focused on providing financial information within a company to assist in decision-making, planning, and control.

Decision Makers

Individuals or entities that have the authority to make choices or form policies within organizations, significantly impacting its direction and operations.

Days' Sales

A financial metric that estimates the average time it takes for a company to turn its inventory into sales.

Raw Materials Inventory

The total cost of all the materials kept in stock that are intended to be used in the manufacturing process.