What Is the Maximum Rate That Can Be Paid on Debt

question 18

Multiple Choice

What is the maximum rate that can be paid on debt and maintain a 14% WACC with a 19% expected return on equity in a firm with a 60% debt-to-asset ratio? Ignore taxes.

• A) 6.50%
• B) 9.90%
• C) 10.67%
• D) 11.14%

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