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