πŸ“Š Financial Management
Q. A quick approximation of the typical firm's cost of equity may be calculated by
  • (A) adding a 5 percent risk premium to the firm's before-tax cost of debt.
  • (B) adding a 5 percent risk premium to the firm's after-tax cost of debt.
  • (C) subtracting a 5 percent risk discount from the firm's before-tax cost of debt.
  • (D) subtracting a 5 percent risk discount from the firm's after-tax cost of debt.
πŸ’¬ Discuss
βœ… Correct Answer: (A) adding a 5 percent risk premium to the firm's before-tax cost of debt.

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