The General Store Has a Cost of Equity of 15

question 7

Multiple Choice

The General Store has a cost of equity of 15.8 per cent,a pre-tax cost of debt of 7.7 per cent,and a tax rate of 32 per cent.What is the firm's weighted average cost of capital if the debt-equity ratio is 0.40,assuming a classical tax system?

• A)12.78 per cent
• B)10.18 per cent
• C)14.93 per cent
• D)13.30 per cent
• E)11.72 per cent

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