Brewster's Is Considering a Project That Is Equally as Risky

question 59

Multiple Choice

Brewster's is considering a project that is equally as risky as the firm's current operations. The firm has a cost of equity of 13.7 percent and a pre-tax cost of debt of 8.4 percent. The debt-equity ratio is .65 and the tax rate is 36 percent. What is the cost of capital for this project?

• A) 9.97 percent
• B) 10.42 percent
• C) 11.38 percent
• D) 11.62 percent
• E) 13.30 percent