Multiple Choice
Coco Company is financed entirely by common stock which is priced to offer a 10% rate of return.Coco has an income tax rate of 40%.If the company repurchases 40% of the stock and substitutes an equal value of debt costing 7%, what is the cost on the common stock after repurchasing?
A) 10%
B) 11.2%
C) 12%
D) None of the above
Correct Answer:
Verified
Correct Answer:
Verified
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