Problem:
Your firm has a debt-equity ratio of 0.75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%.
What is your cost of equity if you ignore taxes?
A. 11.25%
B. 12.21%
C. 16.67%
D. 19.88%
E. 21.38%
F. None of the above
Summary of question:
This question belongs basically to Finance as well as it explains about calculation of cost of equity with debt to equity ratio, pre-cost of debt and return on assets being given.