Calculate the cost of capital for an all-equity firm with equity of $12,500 and expected earnings of $1,900.Multiple choice question.6.6%16.5%14.4%15.2%
Question
Calculate the cost of capital for an all-equity firm with equity of 1,900.Multiple choice question.6.6%16.5%14.4%15.2%
Solution
The cost of capital for an all-equity firm is calculated by dividing the expected earnings by the total equity and then multiplying by 100 to get a percentage.
Here's the step-by-step calculation:
- Divide the expected earnings (12,500). The result is 0.152 or 15.2% when expressed as a percentage.
So, the cost of capital for this all-equity firm is 15.2%.
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