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:

Tolerance Zone

An area defined by upper and lower limits in which a part feature's dimension or location must lie to be accepted during manufacturing.

Two Dimensional

Pertaining to or occurring on a plane, involving width and height but not depth, typically used in reference to shapes, designs, or drawings.

Profile-Of-A-Line Tolerancing

A dimensional specification technique that controls the shape and size of a line feature, ensuring it stays within defined tolerance zones along its length.

Single Entity

An individual unit, object, or being considered as distinct and independent.