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The Backwoods Lumber Co

Question 70

Multiple Choice

The Backwoods Lumber Co. has a debt-equity ratio of.80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on M&M II with no taxes?


A) 6.76%
B) 7.00%
C) 7.25%
D) 7.40%
E) 7.50%

Correct Answer:

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