A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its...
A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0.5?
Group of answer choices
10%
12%
8%
14%
Homework Answers
![Re = Ra +(Ra-Rd)(D/E)(1-t) Ra = unlevered cost of equity Ra = 16% - [1Ra-1Rd] Ra = Unlevered cost of equity = 12.00% Ra = unl](http://img.homeworklib.com/questions/cb4c5d60-0854-11ec-82a5-a31c98c1263b.png?x-oss-process=image/resize,w_560)
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A firm has a debt-to-equity ratio of 1. Its cost of equity is
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