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

question 73

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 pre-tax 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)11.1%
• B)11.7%
• C)10.3%
• D)9.8%

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Definitions:

Foreign Substance

Any material or substance that is not naturally part of an object or body and may be harmful or benign.

Disease-causing Agent

An organism or substance that is capable of producing disease, such as bacteria, viruses, or toxins.

Lymphatic Vessels

A network of thin tubes that transport lymph, a fluid containing infection-fighting white blood cells, throughout the body.