Answer:
d. The cost of equity for an all-equity firm is less than the cost of equity for a levered firm.
Explanation:
The correct statement is that, the cost of equity for an all-equity firm is less than the cost of equity for a levered firm.
Mathematically, Cost of equity =([DPS/CMV] + GRD)
where;
DPS = Dividends per share
CMV = Current market value
GRD = Growth rate of divide
From the investor's perspective, cost of equity can be defined as the rate of return expected from an investment in equity.
From the company’s perspective, cost of equity gives the expected rate of return on an investment.
