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

question 11

Multiple Choice

A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is.25, what would its cost of equity be if the debt-to-equity ratio were 0?

• A) 11.11%.
• B) 12.57%.
• C) 13.33%.
• D) 16.00%.

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Definitions:

Testosterone

A steroid hormone that plays a key role in the development of male reproductive tissues, as well as promoting secondary sexual characteristics such as increased muscle and bone mass, and the growth of body hair.

Estrogen

A group of steroid hormones that play an essential role in the development and regulation of the female reproductive system and secondary sex characteristics.

Hormones

Chemical messengers produced by glands in the body that regulate the activity of cells or organs, influencing many physiological processes.

Neurotransmitters

Chemicals that transmit signals across a synapse from one neuron to another 'target' neuron.