Multiple Choice
Johnson Fuel Systems has a weighted average cost of capital of 7.35%. Estimate Johnson's cost of equity given the following information: The firm's effective tax rate is 25%, they have an equal mix of debt and equity, the required return on the market portfolio is 9%, Johnson has a before-tax cost of debt of 6%, and the risk-free rate of return is 3%.
A) 2.25%
B) 5.10%
C) 9.00%
D) 10.20%
Correct Answer:
Verified
Correct Answer:
Verified
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