The Current Market Rate of Return Is 12% and the Risk-Free

question 63

Multiple Choice

The current market rate of return is 12% and the risk-free rate is 4%. You have been given the job of determining your firm's cost of capital components. The company has 1 million shares outstanding with a current value of $22.50 per share. The debt represents 30% of the capital structure and the yield to maturity is 12%. The b of the equity is 1.4 and the tax rate if 30%. What is the firm's WACC?

• A) 10.44%
• B) 13.16%
• C) 14.24%
• D) 19.04%
• E) 14.28%

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