A Firm Uses Only Debt and Equity in Its Capital

question 18

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 35 percent. The firm's cost of equity is 14 percent and it has a tax rate of 30 percent. If the firm's WACC is 11 percent, what is the firm's before-tax cost of debt?

• A)13.41 percent
• B)6.10 percent
• C)5.50 percent
• D)(-3.00 percent)