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A Firm Has a Debt-To-Equity Ratio of 1

Question 33

Multiple Choice

A firm has a debt-to-equity ratio of 1.Its levered cost of equity is 16%,and its cost of debt is 8%.If there were no taxes,what would be its cost of equity if the debt-to-equity ratio were zero?


A) 8%
B) 10%
C) 12%
D) 14%

Correct Answer:

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