Using the Original Modigliani and Miller Assumptions If a Firm's

question 103

Multiple Choice

Using the original Modigliani and Miller assumptions if a firm's cost of capital is 12% when it is all equity financed and it's cost of debt is 8%, the cost of equity will be ________% when the firm is financed with equal amount of debt and equity.

• A) 12%
• B) 24%
• C) 16%
• D) cannot be determined with the information given.