XYZ Corporation's Capital Structure Consists of 60% Debt (With a Pretax

question 166

Multiple Choice

XYZ Corporation's capital structure consists of 60% debt (with a pretax cost of 10%) , and the balance of common equity (with a cost of 15%) . The company's income tax rate (federal and state combined) , t, is 40%. XYZ's weighted-average cost of capital (WACC) , to one decimal point, is:

• A) 8.4%.
• B) 9.0%.
• C) 9.6%.
• D) 11.4%.
• E) 12.0%.

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