A Firm Has a Debt-To-Equity Ratio of 1

question 53

Multiple Choice

A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?

• A) 10.0%.
• B) 10.75%.
• C) 12.50%.
• D) 7.73%.

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Definitions:

Blood Gas

A test that measures the amounts of oxygen and carbon dioxide in the blood, often used to assess lung function and how well the lungs are able to move oxygen into the blood and remove carbon dioxide.

Positive Chvostek Sign

A clinical sign indicating neuromuscular excitability due to hypocalcemia where tapping facial nerves trigger twitching.

Chronic Alcohol Abuse

The prolonged and excessive consumption of alcohol, leading to significant impairment or distress, and often resulting in health and social problems.

Hyperparathyroidism

A condition in which the parathyroid glands produce too much parathyroid hormone, leading to high calcium levels in the blood and various health issues.