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Backwoods Lumber AB Has a Debt-Equity Ratio of

Question 27

Multiple Choice

Backwoods Lumber AB has a debt-equity ratio of .80.The firm's required return on assets is 12% and its cost of equity is 15.68%.What is the pre-tax cost of debt based on MM Proposition II with no taxes?


A) 6.76%
B) 7.00%
C) 7.25%
D) 7.40%
E) 7.50%

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