Assume That XYZ Corporation Is a Leveraged Company with the Following

question 94

Multiple Choice

Assume that XYZ Corporation is a leveraged company with the following information: K_l = cost of equity capital for XYZ = 13%
I = before-tax borrowing cost = 8%
T = marginal corporate income tax rate = 30%
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%