A Firm Uses Only Debt and Equity in Its Capital

question 71

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 75 percent. The firm's cost of equity is 16 percent and it has a tax rate of 21 percent. If the firm's WACC is 13%, what is the firm's before-tax cost of debt?

• A) 6.89 percent
• B) 6.28 percent
• C) 5.71 percent
• D) 5.06 percent

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Definitions:

Role Ambiguity

Uncertainty and lack of clarity surrounding an individual's job responsibilities, expectations, and the scope of their role within an organization.

Micromanaging

A management style wherein a manager closely observes or controls the work of their subordinates or employees excessively.

Role Conflict

A situation where an individual faces incompatible demands and expectations from multiple roles they are engaged in, leading to stress and difficulty in satisfying all requirements.

Interpersonal Relations

The interactions and relationships that occur between individuals in various contexts, such as work, family, and social settings.