A Firm Has a Market Value of Equity of $40,000

question 10

Multiple Choice

A firm has a market value of equity of $40,000. It borrows $8000 at 7%. If the unlevered cost of equity is 16%, what is the firm's cost of equity capital?

• A) 8.9%
• B) 21.4%
• C) 17.8%
• D) 24.9%

---

Definitions:

Heirs

Individuals legally entitled to inherit a deceased person's assets.

Rate Of Return

Fluctuations in the value of an investment during a pre-defined period, calculated as a percentage of the investment’s commencement cost.

Start Saving

The practice of setting aside a portion of current income for future use, aimed at building financial security.

Deposit

The act of placing money into a financial institution for safekeeping or as a way to earn interest.