A Firm Uses Only Debt and Equity in Its Capital

question 75

Multiple Choice

A firm uses only debt and equity in its capital structure.The firm's weight of equity is 35 percent.The firm's cost of equity is 14 percent and it has a tax rate of 30 percent.If the firm's WACC is 11 percent,what is the firm's before-tax cost of debt?

• A) 13.41 percent
• B) 6.10 percent
• C) 5.50 percent
• D) −3.00 percent

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Definitions:

Love To Sell

A passion or deep enjoyment found in the act of selling, often characterized by a fervent desire to meet customer needs and achieve sales targets.

Intangible Products

Products that cannot be touched or physically measured, such as services, digital goods, and experiences.

Nonfinancial Rewards

Benefits provided to employees that do not involve monetary compensation, such as recognition, flexible working hours, and professional development opportunities.