Suppose That T-Shirts, Inc

Multiple Choice

Suppose that T-shirts, Inc.'s capital structure features 25 percent equity, 75 percent debt, and that its before-tax cost of debt is 8 percent, while its cost of equity is 12 percent. If the appropriate weighted average tax rate is 21 percent, what will be T-shirts' WACC?

A) 9.00 percent
B) 7.74 percent
C) 7.20 percent
D) 4.75 percent