Longmont Inc

question 22

Multiple Choice

Longmont Inc.is in the property management business and has a required return on its assets of 10%.It can borrow in the debt market at 5%.If there are no taxes and M&M's proposition II holds,what is the cost of equity if there is 10% equity financing and 90% debt financing?

• A)45%
• B)50%
• C)55%
• D)60%

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Definitions:

Refracted

Refracted refers to the change in direction of a wave, such as light or sound, as it passes from one medium to another at an angle.

Reflected

The return of light, heat, sound, or energy from a surface.

Seismic Reflection Survey

A geophysical method for exploring Earth's subsurface by sending seismic waves and analyzing the reflected signals from subsurface structures.

Magnetic Survey

A geophysical method for mapping variations in the Earth's magnetic field, often used in mineral exploration.