Multiple Choice
Jefferson Electrical Supply has a cost of equity of 12% and an unlevered cost of capital of 10.5%. The company has $12,000 in debt that is selling at par value. The levered value of the firm is $28,000 and the tax rate is 34%. What is the pre-tax cost of debt?
A) 6.67%
B) 7.23%
C) 7.47%
D) 7.65%
E) 7.71%
Correct Answer:
Verified
Correct Answer:
Verified
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