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DL Trucking Has a Cost of Equity of 15

Question 2

Multiple Choice

DL Trucking has a cost of equity of 15.4 percent and an unlevered cost of capital of 13.2 percent.The company has $24,000 in debt that is selling at par value.The levered value of the firm is $59,000 and the tax rate is 34 percent.What is the pretax cost of debt?


A) 8.75%
B) 8.34%
C) 7.38%
D) 9.20%
E) 9.69%

Correct Answer:

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