A Firm with a 40 Percent Marginal Tax Rate Has

question 58

Multiple Choice

A firm with a 40 percent marginal tax rate has a capital structure of $60,000,000 in debt and $140,000,000 in equity.What is the firm's weighted cost of capital if the marginal pretax cost of debt is 12 percent, the firm's average pretax cost of debt outstanding is 8%, and the cost of equity is 14.5 percent?

• A)13.75%
• B)11.59%
• C)12.31%
• D)10.45%

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Definitions:

Basin and Range Province

A vast geographical area in the United States characterized by alternating basins and mountain ranges, formed by stretching of the Earth's crust.

Gulf Coast Region

A geographical area in the United States bordering the Gulf of Mexico, known for its warm climate, wetlands, and as an important area for energy production and shipping.

Appalachian Mountains

A mountain range in eastern North America, extending from Canada to the southern United States, known for its rich biodiversity and history.

Fold and Thrust Belt

A series of mountainous folds and thrust faults that develop near convergent tectonic plate boundaries, where one plate is forced over another.