Question 2. The required return on the assets of your firm is 32%. Its cost of debt is 24%, and the debt-to-assets ratio is 45%.

(i). What is firms cost of equity?

(ii). What would 50% cost of equity imply about debt-to-equity ratio of a competitor which is similar to you in all other respects?

(iii). Based on this information, what is the proportion of equity in your competitor?

(iv). What is the proportion of equity in your firm?