A Firm Uses Only Debt and Equity in Its Capital

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of equity is 70 percent. The firm's cost of equity is 13 percent and it has a tax rate of 30 percent. If the firm's WACC is 11 percent, what is the firm's before-tax cost of debt?

A) 7.17 percent
B) 9.05 percent
C) 6.38 percent
D) 5.36 percent