A Firm Has a Market Value of Assets of $50,000

question 69

Multiple Choice

A firm has a market value of assets of $50,000.It borrows $10,000 at 5%.If the unlevered cost of equity is 15%,what is the firm's cost of equity capital?

• A)15%
• B)17.5%
• C)18.5%
• D)19.2%
• E)20.6%

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Definitions:

Defense Mechanism

Psychological strategies brought into play by individuals to protect themselves from unacceptable thoughts or feelings.

Rationalization

A defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

Projection

An ego defense mechanism whereby individuals attribute to other people characteristics or impulses they do not wish to acknowledge in themselves.

Defecating

The act of expelling feces from the body's large intestine through the anus.