Multiple Choice
An all equity firm has a cost of capital of 15 percent.The firm is considering switching to a debt-equity ratio of .65 with a pretax cost of debt of 7.5 percent.What will the firm's cost of equity be if the firm makes the switch? Ignore taxes.
A) 11.25%
B) 12.21%
C) 16.67%
D) 19.88%
E) 21.38%
Correct Answer:
Verified
Correct Answer:
Verified
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