Times Corporation, Whose Tax Rate Is 30%, Has Two Sources

question 83

Multiple Choice

Times Corporation, whose tax rate is 30%, has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of 7%, and equity capital with a market value of $18,000,000 and a cost of equity of 11%. Times Corporation's after-tax cost of debt is ________.

• A) 9.38%
• B) 4.90%
• C) 7.00%
• D) 11.00%

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