Bay State Technology Has Determined That Its Cost of Equity

question 47

Multiple Choice

Bay State Technology has determined that its cost of equity is 15% and its after-tax cost of debt is 7.2%.Bay State expects to earn $14 million after taxes next year and, as a new firm, does not pay any dividends.The stock sells for $24.Bonds are currently selling at par value.Compute Bay State's weighted cost of capital.A partial balance sheet is shown below:

• A) 13.4%
• B) 13.1%
• C) 11.6%
• D) 12.7%

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