A Firm Has a Capital Structure with $100 Million in Equity

question 65

Multiple Choice

A firm has a capital structure with $100 million in equity and $100 million of debt.The cost of equity capital is 14% and the pretax cost of debt is 8%.If the marginal tax rate of the firm is 30%,compute the weighted average cost of capital of the firm.

• A)9.8%
• B)10.3%
• C)11.1%
• D)11.7%