Medzyme Pharmaceuticals has maintained a 50-50 D-E mix for capital investments. Equity capital has cost 11%; however,

Question:

Medzyme Pharmaceuticals has maintained a 50-50 D-E mix for capital investments. Equity capital has cost 11%; however, debt capital that historically cost 9% has now increased by 20% per year. If Medzyme does not want to exceed its historical weighted average (WACC), and it is forced to go to a D-E mix of 75–25, the maximum acceptable capital is closest to:
(a) 7.6%
(b) 9.2%
(c) 9.8%
(d) 10.9%

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...