A Firm Uses Only Debt and Equity in Its Capital

question 2

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 70%. The firm's cost of equity is 13% and it has a tax rate of 30%. If the firm's WACC is 11%, what is the firm's before-tax cost of debt?

• A) 7.17%
• B) 9.05%
• C) 6.38%
• D) 5.36%

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