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 debt is 75 percent. The firm could issue new bonds at a yield to maturity of 12 percent and the firm has a tax rate of 30 percent. If the firm's WACC is 13 percent, what is the firm's cost of equity?

A) 38.29 percent
B) 36.00 percent
C) 26.80 percent
D) 4.00 percent