A firm's return on assets is 12% and the cost of the firm's debt is 7%.Given a 0.7 debt to equity ratio,what is the levered cost of equity?

Question

Quizplus · Accepted Answer

The levered cost of equity can be calculated using the formula: Levered Cost of Equity = Return on Assets + (Debt/Equity) * (Return on Assets - Cost of Debt). Substituting the given values: 12% + 0.7 * (12% - 7%) = 15.5%.

A Firm's Return on Assets Is 12% and the Cost