The Company Cost of Capital, After Tax, for a Firm

question 74

Multiple Choice

The company cost of capital, after tax, for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:

• A)7.02%
• B)9.12%
• C)10.80%
• D)13.80%

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Definitions:

Second Year

The period or stage that follows the first year in a multi-year sequence, such as in education or a job.

Annual Cost

The total expense associated with operating a business or owning an asset for one year.

First Year

Typically refers to the initial year of an educational course, professional endeavor, or any period's start.

Total Revenue

The total income generated from the sale of goods or services before any expenses are deducted.