(Topic 7) The before-tax cost of long-term debt is 10% and the cost of equity is 12%. The marginal tax rate is 35%. The company's weighted average cost of capital is:

The correct answer is B. 8.3%.. See the full explanation below for the reasoning.

Question

(Topic 7)

The before-tax cost of long-term debt is 10% and the cost of equity is 12%. The marginal tax rate is 35%. The company's weighted average cost of capital is:

Options

A6.3%.
B8.3%.
C10.6%.
D11.3%.

How the community answered

(50 responses)

A
2% (1)
B
84% (42)
C
10% (5)
D
4% (2)

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