Suppose Blank Company Has Only One Project, as Forecast Above

question 49

Multiple Choice

Suppose Blank Company has only one project, as forecast above, and an unlevered cost of equity of 8%. If the company borrows $10,000 at 5% to make the investment, what is the return to equity holders if demand is strong?

• A) 8.0%
• B) 8.95%
• C) 28.6%
• D) 38.0%

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Definitions:

Fractional Interest

Ownership in a part or fraction of an asset, where the ownership is shared among multiple parties.

Debt Instruments

Financial vehicles representing a promise to pay back borrowed funds, including bonds, notes, and debentures.

Unanimous Approval

Agreement or consent by all members or parties involved without any dissent.

51% Majority Vote

A decision-making process where more than half (51% or more) of the votes cast by members of a group are in agreement, thereby determining the outcome.