Bellamee, Inc

question 45

Multiple Choice

Bellamee, Inc. has a required rate of return on its assets of 12% and a cost of debt of 6.25%. Its current debt-to-equity ratio is 1/5. What is the required rate of return on its equity?

• A) 12.15%
• B) 13.15%
• C) 14.15%
• D) None of the above.

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Definitions:

Treasury Stock

Shares of a company's own stock that it has reacquired and held in the company's treasury.

Cost Per Share

The price at which a company's shares were initially offered to the public or the current market value of a share.

Stockholders' Equity

Represents the owners' residual interest in a corporation's assets after deducting liabilities.

Buy Back

A corporate action in which a company repurchases its own shares from the marketplace.