Question

The business risk of a firm:

A. depends on the level of unsystematic risk associated with the assets of the firm.
B. is inversely related to the required return on the firm's assets.
C. is dependent upon the relative weights of the debt and equity used to finance the firm.
D. has a positive relationship with the cost of equity for that firm.
E. has no relationship with the required return on a firm's assets according to M&M Proposition II.

Answer 1

Option D is correct one.

The business risk of a firm: has a positive relationship with the cost of equity for that firm.

Step-by-step explanation:

Business risk methods a possibility of causing misfortunes or less benefit than anticipated.

The expense of value is the arrival an organization requires to choose if a venture meets capital bring prerequisites back. An association's expense of value speaks to the remuneration the market requests in return for claiming the advantage and bearing the danger of proprietorship.

An organization's all out expense of capital incorporates obligation and value finances that are required to pay enthusiasm on obligation subsidizing and the profits on value subsidizing. The expense of value financing is dictated by evaluating the normal rate of return that could be normal dependent on returns produced by the more extensive market. In this manner, since advertise hazard legitimately influences the expense of value financing, it additionally straightforwardly influences the absolute expense of capital.