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Auto Care Has a Pretax Cost of Debt of 8

Question 29

Multiple Choice

Auto Care has a pretax cost of debt of 8.3 percent and an unlevered cost of capital of 13.7 percent. The total tax rate is 23 percent and the cost of equity is 15.6 percent. What is the debt-equity ratio?


A) .47
B) .61
C) .53
D) .42
E) .46

Correct Answer:

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