Use the Information for the Question(s)below

question 13

Multiple Choice

Use the information for the question(s) below.
KT Enterprises is considering undertaking a new project.Based upon analysis of firms with similar projects,KT has determined that an unlevered cost of equity of 12% is suitable for their project.KT's marginal tax rate is 35%,its borrowing rate is 7%,and KT does not believe that its borrowing rate will change if the new project is accepted.
-If KT expects to maintain a debt to equity ratio for this project of 1,then KT's equity cost of capital,r_E,for this project is closest to:

• A)17.0%
• B)5.0%
• C)15.0%
• D)12%

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Definitions:

Personality Traits

Are characteristic patterns of thoughts, feelings, and behaviors that make a person unique and can influence an individual's actions and reactions.

Distinctiveness

The quality of being uniquely different from others in specific characteristics or attributes.

Appropriateness

The suitability of an action, response, or decision in relation to the circumstances or guidelines.

Psychodynamic Theories

A group of theories that emphasize the influence of the unconscious mind and childhood experiences on behavior.