Blue Ridge Tours has a cost of equity of 14.28 percent and a pre-tax cost of debt of 8.1 percent. The debt-equity ratio is 0.60 and the tax rate is 34 percent. What is the firm's unlevered cost of capital? A) 9.8 percent B) 12.21 percent C) 12.53 percent D) 13.07 percent

Blue Ridge Tours has a cost of equity of 14.28 percent and a pre-tax cost of debt of 8.1 percent. The debt-equity ratio is 0.60 and the tax rate is 34 percent. What is the firm's unlevered cost of capital? A) 9.8 percent B) 12.21 percent C) 12.53 percent D) 13.07 percent

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 1P

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Blue Ridge Tours has a cost of equity of 14.28 percent and a pre-tax cost of debt of 8.1 percent. The debt-equity ratio is 0.60 and the tax rate is 34 percent. What is the firm's unlevered cost of capital?
	A)	9.8 percent
	B)	12.21 percent
	C)	12.53 percent
	D)	13.07 percent

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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