Delta Mills and Franklin Mill Are Identical Firms Except for Their

Multiple Choice

Delta Mills and Franklin Mill are identical firms except for their capital structures.Delta is an unlevered firm with $680,000 of equity.Franklin is a levered firm with $425,000 of equity and $255,000 of debt at an interest rate of 6.2 percent.Both Delta and Franklin have an expected EBIT of $84,000.Ignore taxes.Delta has a WACC of ________ percent and Franklin's WACC is ________ percent.

A) 12.35; 11.05
B) 12.35; 14.10
C) 12.35; 12.35
D) 14.10; 14.10
E) 16.10; 14.10