Your Firm Is Planning to Invest in a New Electrostatic

question 76

Multiple Choice

Your firm is planning to invest in a new electrostatic power generation system.Electrostat Inc is a firm that specializes in this business.Electrostat has a stock price of $25 per share with 16 million shares outstanding.Electrostat's equity beta is 1.18.It also has $220 million in debt outstanding with a debt beta of 0.08.If the risk-free rate is 3%,and the market risk premium is 6%,then your estimate of your cost of capital for electrostatic power generators is closest to:

• A)7.50%.
• B)7.75%.
• C)9.50%.
• D)10.10%.

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Definitions:

Forced-Distribution Method

The forced-distribution method involves grouping employees into predefined frequencies of performance ratings.

Performance Ratings

Assessments of an employee's job performance, often used for feedback, development, and decisions about promotions or raises.

Merit Pay

A compensation strategy that involves giving employees pay increases based on their performance achievements, as an incentive for productivity and excellence.

Effective Career Planning

A strategic approach to identifying one's career goals and outlining the steps and resources necessary to achieve them.