Question

The required return on equity is:

A) It has nothing to do with market risk premium
B) generally less than post-tax debt costs.
C) A debt/capital ratio of 0.5 is smaller than WACC.
D) is directly related to the risk of the company's assets.
E) It is generally the reciprocal of inflation.

Answer 1

D) is directly related to the risk of the company's assets.

Explanation:

Equity which may be defined as what the difference between what your business worth minus what you owe in it.

It can also be put in a way as the remaining value of an owners interest in a particular company after all debt might have been cleared.

Equity= assets - liability

So equity has a lot to do in the risk management of a business or a particular company.