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?
A) 8%
B) 10%
C) 12%
D) 14%
E) 16%

Question

Quizplus · Accepted Answer

The Answer of 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?
A) 8%
B) 10%
C) 12%
D) 14%
E) 16%

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