Times Corporation,whose Tax Rate Is 40%,has Two Sources of Funds

question 7

Multiple Choice

Times Corporation,whose tax rate is 40%,has two sources of funds: long-term debt with a market value of $6,000,000 and an interest rate of 9%,and equity capital with a market value of $18,000,000 and a cost of equity of 11%.Times Corporation's after-tax cost of debt is ________.

• A) 3.40%
• B) 5.40%
• C) 5.00%
• D) 7.40%

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