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CTP · Question #17
(Topic 1) A company's capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firm's after-tax cost of debt is 6%, and its cost of equity is 12%. The…
The correct answer is C. 10.5%. See the full explanation below for the reasoning.
Question
- (Topic 1)
A company’s capital structure includes $800,000,000 in total capital, of which $200,000,000 comes from debt. The firm’s after-tax cost of debt is 6%, and its cost of equity is 12%. The marginal tax rate is currently 40%. What is the company’s weighted average cost of capital?
Options
- A9.9%
- B10.3%
- C10.5%
- D10.8%
How the community answered
(42 responses)- A17% (7)
- B5% (2)
- C69% (29)
- D10% (4)
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