A Firm Has a Capital Structure with $30 Million in Equity

question 91

Multiple Choice

A firm has a capital structure with $30 million in equity and $90 million of debt.The cost of equity capital is 10% and the pretax cost of debt is 6%.If the marginal tax rate of the firm is 40%,compute the weighted average cost of capital of the firm.

• A)4.6%
• B)4.9%
• C)5.2%
• D)5.8%

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Definitions:

Dissociative Identity Disorder

A mental disorder characterized by the presence of two or more distinct personality states that control an individual’s behavior in different circumstances.

Major Depressive Disorder

A mental health condition characterized by persistent feelings of sadness or a lack of interest in outside stimuli, affecting daily functioning.

Antisocial Personality Disorder

A mental condition characterized by a long-term pattern of manipulating, exploiting, or violating the rights of others. This behavior is often criminal.

Dissociative Fugue

A rare psychiatric disorder characterized by reversible amnesia for personal identity, including the memories, personality, and other identifying characteristics of individuality.