# Cost of Equity for a Firm

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%

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