Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes? (Use MM Prop II, No Tax). A. 11.25%
B. 12.21%
C. 16.67%
D. 19.88%
E. 21.38%

D. 19.88%

Explanation:

The computation of the cost of equity is shown below:

Cost of equity = Return on assets + Debt equity ratio × (Return on assets -pre tax cost of debt)

= 0.15 + 0.75 × (0.15  - 0.085)

= 0.19875 or 19.88%

Hence, the correct option is D. 19.88%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

odd consecutive integers are odd integers that follow each other. they have a difference of 2 between every two numbers. if n is an odd integer, then n, n+2, n+4 and n+6 will be odd consecutive integers. the first number in the pattern is always the variable on its own or in this case, "n". examples.