Use TheUse the Firm Has Only Been Listed on the Stock

question 96

Multiple Choice

Use theUse the firm has only been listed on the stock exchange for a short time,you do not have an accurate assessment of Nielson's equity beta.However,you do have the following data for another firm in the same industry: Nielson has a much lower debt-equity ratio of .5,which is expected to remain stable,and Nielson's debt is risk free.Nielson's corporate tax rate is 21%,the risk-free rate is 5%,and the expected return on the market portfolio is 10%.
-Nielson's equity cost of capital is closest to:

• A)11.3%.
• B)12.2%.
• C)14.0%.
• D)14.4%.

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Definitions:

Presidential Power

Refers to the executive powers held by the President of the United States, as defined by the Constitution, including making treaties, appointing federal judges, and acting as commander-in-chief of the armed forces.

Executive Office

A sector of government responsible for implementing laws and administering public policy, usually headed by a president or prime minister.

President (EOP)

The head of the Executive Office of the President, responsible for supporting the President of the United States in carrying out executive functions.