Multiple Choice
The Pizza Palace has a cost of equity of 14.4% and an unlevered cost of capital of 10%. The company has $18,000 in debt that is selling at par value. The levered value of the firm is $32,000 and the tax rate is 35%. What is the pre-tax cost of debt?
A) 4.73%
B) 6.18%
C) 6.59%
D) 7.38%
E) 9.92%
Correct Answer:
Verified
Correct Answer:
Verified
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