A Firm Has a Debt-Equity Ratio of

question 54

Multiple Choice

A firm has a debt-equity ratio of .48.Its cost of debt is 7 percent and its WACC is 10.8 percent.What is its cost of equity if there are no taxes or other imperfections?

• A)10.97 percent
• B)13.05 percent
• C)12.62 percent
• D)11.46 percent
• E)13.67 percent

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Definitions:

Competitive

A market situation where multiple firms or entities vie for the same customers or market share.

World Markets

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Acquired Comparative Advantage

Acquired comparative advantage refers to the benefits a country develops over time through investment, innovation, and improvements in skills and technology, as opposed to advantages due to natural resources or geographic location.

United States

A federal republic consisting of 50 states and a federal district, known for its significant global economic, cultural, and political influence.