Assume That XYZ Corporation Is a Levered Company with the Following

question 19

Multiple Choice

Assume that XYZ Corporation is a levered company with the following information: $$\begin{array} { l } K _ { l } = \text { cost of levered equity capital for } \mathrm { XYZ } = 13 \% \\i = \text { before-tax borrowing cost } = 8 \% \\t = \text { marginal corporate income tax rate } = 30 \%\end{array}$$ If XYZ's debt-to-total-market-value ratio is 40%,then its weighted average cost of capital,K,is:

• A)8%
• B)9%
• C)10%
• D)12%

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Definitions:

Usurious Interest

Exorbitantly high interest rates, often exceeding legal or ethically acceptable limits.

Unconscionable

Refers to actions or terms that are excessively unjust or unreasonable, often to a degree that they violate fairness or ethics.

Supply

The sum of a product or service that can be bought at a specific price.

Land

The surface of the earth and its natural resources, considered a fundamental factor of production in economics.