A Firm Uses Only Debt and Equity in Its Capital

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of debt is 45 percent. The firm could issue new bonds at a yield to maturity of 10 percent and the firm has a tax rate of 21 percent. If the firm's WACC is 12 percent, what is the firm's cost of equity?

A) 15.35 percent
B) 15.63 percent
C) 16.09 percent
D) 14.57 percent