The Backwoods Lumber Co

question 63

Multiple Choice

The Backwoods Lumber Co.has a debt-equity ratio of .80.The firm's required return on assets is 12% and its cost of equity is 16.00%.What is the pre-tax cost of debt based on MM Proposition II with no taxes?

• A)6.76%
• B)7.00%
• C)7.25%
• D)7.40%
• E)7.50%

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