A Firm Has a Debt-To-Equity Ratio of 1/4

question 19

Multiple Choice

A firm has a debt-to-equity ratio of 1/4.The WACC is 18.6%,and the pretax cost of debt is 9.4%.What is the cost of common equity if the tax rate is 34%?

• A) 19.90%
• B) 20.90%
• C) 21.70%
• D) 22.73%

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