The Expected Returns on the Debt and Equity of a Levered

question 8

Multiple Choice

The expected returns on the debt and equity of a levered firm are r_E=15% and r_D=7%, and the current market value of the debt and equity are E=66 and D=44, respectively.What is the firm's weighted average cost of capital (WACC) ?

• A)7.8%
• B)9.8%
• C)11.8%
• D)13.8%

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