Marshall's has a debt-equity ratio of.60. The pre-tax cost of debt is 9.1% and the required return on assets is 14%. What is the cost of equity if you ignore taxes?

Question

Quizplus · Accepted Answer

The cost of equity can be calculated using the formula: Cost of Equity = Required Return on Assets + (Debt/Equity) * (Required Return on Assets - Cost of Debt). Substituting the given values: Cost of Equity = 14% + 0.60 * (14% - 9.1%) = 16.94%.

Marshall's Has a Debt-Equity Ratio Of