Multiple Choice
Blammo,Inc.has a target capital structure of 30% debt and 70% equity.The firm is planning to invest in a project that will necessitate raising new capital.New debt will be issued at a before-tax yield of 14%,with a coupon rate of 10%.The equity will be provided by internally generated funds so no new outside equity will be issued.If the required rate of return on the firm's stock is 22% and its marginal tax rate is 35%,compute the firm's cost of capital.
A) 18.00%
B) 18.13%
C) 19.68%
D) 15.55%
Correct Answer:
Verified
Correct Answer:
Verified
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