A Firm Uses Only Debt and Equity in Its Capital

question 6

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 70 percent. The firm's cost of equity is 13 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)7.17 percent
• B)9.05 percent
• C)6.38 percent
• D)5.36 percent

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Definitions:

Option Group

A graphical control element allowing the user to choose only one of a predefined set of mutually exclusive options.

Grouping Controls

Elements in user interfaces that allow for the organization and management of multiple controls or items as a single unit.

Yes/No Field

A type of database field that allows for the storage of a boolean value, typically representing a true (Yes) or false (No) state.

Check Box

An interactive element in graphical user interfaces that can be toggled between two states, such as checked or unchecked.