Multiple Choice
Trendsetters has a cost of equity of 14.6 percent.The market risk premium is 8.4 percent and the risk-free rate is 3.9 percent.The company is acquiring a competitor, which will increase the company's beta to 1.4.What effect, if any, will the acquisition have on the firm's cost of equity capital?
A) No effect
B) Decrease of .62 percent
C) Decrease of .84 percent
D) Increase of 1.06 percent
E) Increase of .13 percent
Correct Answer:
Verified
Correct Answer:
Verified
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