Biology Forums - Study Force

James Bay Water Park operates in a world with zero taxes and no financial distress. The firm has a debt/equity ratio of 1. The cost of equity is 15% and the cost of debt is 8%. The only difference between Whispering Pines Resort and James Bay Water Park is that Whispering Pines Resort has a debt/equity ratio of 2. According to M&M, the cost of equity for Whispering Pines Resort will be

▸ the same as the cost of equity for James Bay Water Park.

▸ less than the cost of equity for James Bay Water Park.

▸ greater than the cost of equity for James Bay Water Park.

▸ Insufficient information is provided to answer the question.

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