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

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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