Winter's Toyland has a debt-equity ratio of 0.65. The pre-tax cost of debt is 8.7 percent and the required return on assets is 16.1 percent

Winter's Toyland has a debt-equity ratio of 0.65. The pre-tax cost of debt is 8.7 percent and the required return on assets is 16.1 percent. What is the cost of equity if you ignore taxes?    A.  19.31 percent B.  19.74 percent C.  20.29 percent D.  20.46 percent E.  20.91 percent RE = 0.161 + (0.161 - 0.087) × 0.65 = 20.91 percent

64.

Jefferson & Daughter has a cost of equity of 14.6 percent and a pre-tax cost of debt of 7.8 percent. The required return on the assets is 13.2 percent. What is the firm's debt-equity ratio based on M & M II with no taxes?    A.  0.26 B.  0.33 C.  0.37 D.  0.43 E.  0.45 RE = 0.146 = 0.132 + (0.132 - 0.078) × D/E; D/E = 0.26

65.

The Corner Bakery has a debt-equity ratio of 0.62. The firm's required return on assets is 14.2 percent and its cost of equity is 16.1 percent. What is the pre-tax cost of debt based on M & M Proposition II with no taxes?    A.  7.10 percent B.  10.68 percent C.  11.14 percent D.  17.56 percent E.  18.40 percent RE = 0.161 = 0.142 + (0.142 - Rd) × 0.62; Rd = 11.14 percent