Spencers Magic Shows Incorporated Is Financed 100% with Equity and Intends

question 5

Multiple Choice

Spencers Magic Shows Incorporated is financed 100% with equity and intends to remain this way. Spencers' common stock beta is 0.85, the expected market return average market return) is 14%, and the risk-free rate is 6%. If all of Spencers' equity is internal, what are the cost of equity and the weighted average cost of capital for Spencers?

• A)12.80%
• B)5.48%
• C)14.00%
• D)13.10%

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Definitions:

Anorexia Nervosa

Anorexia nervosa is an eating disorder characterized by an obsession with food, body weight, and shape, leading to extreme weight loss.

Eating Disorder

A mental disorder characterized by abnormal or disturbed eating habits, such as anorexia or bulimia.

Maladaptive

Behaviors or actions that are counterproductive to one's own welfare or well-being.

Medical Model

A framework for understanding illnesses and disorders through biological causes that can be treated within the healthcare system.