Luther's Famous Barbeque Has Estimated the Following Cost of Debt

question 18

Multiple Choice

Luther's Famous Barbeque has estimated the following cost of debt before-tax) and cost of equity.
What is the cost of capital at Luther's optimal capital structure given the above information and a 40% effective tax rate?

• A)8.71%
• B)8.89%
• C)9.03%
• D)9.37%

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Definitions:

Population

A group of individuals of the same species living and interacting within a particular area.

Gene Pool

Total of the alleles of all the individuals in a population.

Permian

The last geological period of the Paleozoic era, spanning from about 299 to 252 million years ago, preceding the Mesozoic era.

Mesozoic Layers

Stratified layers of rock that were formed during the Mesozoic Era, which spans from about 252 to 66 million years ago, encompassing the Triassic, Jurassic, and Cretaceous periods.