Suppose Blank Company Has Only One Project, as Forecast Above

question 73

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 expected return to equity holders? Assume the demand is as expected.

• A) 8.0%
• B) 11.6%
• C) 9.33%
• D) 30.0%

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Definitions:

Initial Public Offering

A process by which a private company becomes publicly traded by offering its shares to the public for the first time.

Secondary Market

The marketplace where investors buy and sell securities they own to other investors or traders, after the original issuance of the security.

Issue Securities

The process by which corporations, governments, or other entities raise money by issuing stocks, bonds, or other financial instruments to investors.

Stock Prices

The current price at which a share of a company is traded on the stock market.