Ghan Rail Corporation,whose Tax Rate Is 40%,has Two Sources of Funds

Multiple Choice

Ghan Rail Corporation,whose tax rate is 40%,has two sources of funds: long-term debt with a market value of $8 000 000 and an interest rate of 8%,and equity capital with a market value of $12 000 000 and a cost of equity of 12%.Ghan Rail's after-tax cost of debt is:

A) .0800
B) .0480
C) .0912
D) .0320