Use the Information for the Question(s)below

question 91

Multiple Choice

Use the information for the question(s) below.
KT Enterprises is considering undertaking a new project.Based upon analysis of firms with similar projects,KT has determined that an unlevered cost of equity of 12% is suitable for their project.KT's corporate tax rate is 21%,its borrowing rate is 7%,and KT does not believe that its borrowing rate will change if the new project is accepted.
-If KT expects to maintain a debt to equity ratio for this project of .6 then KT's equity cost of capital,rE,for this project is closest to:

• A)5.0%.
• B)12%.
• C)15.0%.
• D)17.0%.

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