You Are Analyzing the Cost of Capital for a Firm

question 27

Multiple Choice

You are analyzing the cost of capital for a firm that is financed with $300 million of equity and $200 million of debt. The cost of debt capital for the firm is 9 percent, while the cost of equity capital is 19 percent. What is the overall cost of capital for the firm? Assume there are no taxes.

• A) 13.0%
• B) 14.0%
• C) 15.0%
• D) 16.0%

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Definitions:

StdDev

Another term for standard deviation, indicating how much individual data points deviate from the mean.

Median

The central number that splits a dataset into two equal parts, distinguishing the upper half from the lower half.

Ogive

A graphical representation of the cumulative frequency or cumulative relative frequency on a graph, often used in statistics.

IQR

The interquartile range (IQR) is a measure of statistical dispersion, representing the difference between the 75th (upper quartile) and 25th (lower quartile) percentiles of a data set.