A Firm Uses Only Debt and Equity in Its Capital

question 89

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 75 percent. The firm's cost of equity is 16 percent and it has a tax rate of 30 percent. If the firm's WACC is 13%, what is the firm's before-tax cost of debt?

• A)6.89 percent
• B)6.28 percent
• C)5.97 percent
• D)5.71 percent

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