Zolar Corp

question 11

Multiple Choice

Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions) :
Assume that Zolar is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure with that has 70 percent debt with a pre tax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zolar based on the new capital structure.

• A) 20.63%
• B) 12.56%
• C) 13.01%
• D) 9.94%

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