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 equity is 35 percent. The firm's cost of equity is 14 percent and it has a tax rate of 21 percent. If the firm's WACC is 11 percent, what is the firm's before-tax cost of debt?

A) 11.88 percent
B) 9.38 percent
C) 5.50 percent
D) −3.00 percent