The cost of equity of a corporate firm comes out to be 12.25%.
The cost of equity is referred to as the percentage of the return being paid by the company to its equity stock investors.
Given values:
Debt-to-equity ratio: 1.75
Cost of debt: 7%
Computation of cost of equity of the firm:
[tex]\rm\ Cost \rm\ of \rm\ Equity=\rm\ Cost \rm\ of \rm\ debt \times \rm\ Debt \rm\ Equity \rm\ Ratio\\\rm\ Cost \rm\ of \rm\ Equity=0.07 \times\ 1.75\\\rm\ Cost \rm\ of \rm\ Equity=0.1225\\\rm\ Cost \rm\ of \rm\ Equity=12.25%[/tex]
Therefore, when the cost of debt is 7% with a debt-equity ratio is 1.75, then the cost of equity comes out to be 12.25%.
Learn more about the debt-equity ratio in the related link:
https://brainly.com/question/25651634
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