The Required Return on Equity for a Levered Firm Is

Multiple Choice

The required return on equity for a levered firm is 10.60 percent.The debt to equity ratio is 1/2,the tax rate is 40 percent,the pre-tax cost of debt is 8 percent.Find the cost of capital if this firm were financed entirely with equity.

A) 10 percent
B) 12 percent
C) 8.67 percent
D) none of the options