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    Cost of Equity for a Firm

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    What is the cost of equity for a firm for which the required return on assets is 14%, the cost of debt is 11%, and the target debt/equity ratio is 0.5? Ignore taxes.

    a) 11.0%
    b) 12.5%
    c) 14.0%
    d) 15.5%
    e) 16.0%

    © BrainMass Inc. brainmass.com June 3, 2020, 5:37 pm ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/cost-equity-firm-32705

    Solution Preview

    Required return on assets=WACC= (E/V)xRe + (D/V)xRdx(1-Tc)

    Re = cost of equity
    Rd = cost of debt
    E = the market value of the ...

    Solution Summary

    Required return on assets is considered.

    $2.19

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