The M&M Company Is Financed by $10 Million in Debt

Multiple Choice

The M&M Company is financed by $10 million in debt (market value) and $40 million in equity (market value) . The cost of debt is 10 percent and the cost of equity is 20 percent. Calculate the weighted average cost of capital assuming no taxes.

A) 18 percent
B) 20 percent
C) 10 percent
D) 12 percent