Question 13

ABC Stores has a pre-tax cost of debt of 9 percent and a return on assets (unlevered cost of equity) of 14 percent. The debt-equity ratio is 0.75. What is the cost of equity? Assume no taxes.

12.00 percent

16.67 percent

17.75 percent

18.25 percent

7.25 percent

Question 14

ABC has a debt-equity ratio of 1.8. The firms weighted average cost of capital is 15% and its pre-tax cost of debt is 8.6%. Assume no taxes. What is ABCs cost of equity capital (Rs)?

Question 15

ABC has an unlevered cost of capital (Ra) of 15.8%, a cost of debt of 8.7%and a tax rate of 0%. What is the target debt-equity ratio if the targeted cost of equity (Rs) is 20.8%?

Enter you answer in percentages rounded off to two decimal points.