AFP
CTP · Question #13
(Topic 1) Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is…
The correct answer is B. 14.47%. See the full explanation below for the reasoning.
Question
- (Topic 1)
Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is 10%. Given a tax rate of 34%, what is XYZ's cost of common stock?
Options
- A13.25%
- B14.47%
- C15.25%
- D16.53%
How the community answered
(17 responses)- A6% (1)
- B76% (13)
- C6% (1)
- D12% (2)
Community Discussion
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