Use the Information for the Question(s)below

question 13

Multiple Choice

Use the information for the question(s) below.
KT Enterprises is considering undertaking a new project.Based upon analysis of firms with similar projects,KT has determined that an unlevered cost of equity of 12% is suitable for their project.KT's marginal tax rate is 35%,its borrowing rate is 7%,and KT does not believe that its borrowing rate will change if the new project is accepted.
-If KT expects to maintain a debt to equity ratio for this project of 1,then KT's equity cost of capital,r_E,for this project is closest to:

• A)17.0%
• B)5.0%
• C)15.0%
• D)12%

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