Currently, a company is financed with 40% equity and 60% debt. The debt consists of 15-year $1,000 face-value bonds that pay semi-annual interest payments based on an annual coupon rate of 7%. The market price of the firm’s bonds is currently $1034. Further, the company has a beta of 1.4. The expected return on the market is expected to be 14% while the risk free rate is 4%. The marginal tax rate is 40%. What is the company's cost of equity? 10.8% 18.0% 14.0% 14.2%

the cost of the equity of the company is 18%

Explanation:

The computation of the cost of equity is as follows

Cost of equity = Risk free rate of return + beta × (market rate of return - risk free rate of return)

= 4% + 1.4 × (14% - 4)

= 4% + 1.4 × 10%

= 4% + 14%

= 18%

Hence, the cost of the equity of the company is 18%

We simply applied the above formula so that the accurate percentage could come

Therefore the second option is correct

since the options are not listed, when you are working on your budget you should also add water, tv, internet, miscellaneous and your 'fun' money for in your budget. when budgeting, you need to allow for fun money, and mis/accidental money so that you stick to the budget and not go crazy because you feel strapped to the budget.