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

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 cost of capital (WACC), and it is forced to go to a D-E mix of 75–25, the maximum acceptable cost of equity capital is closest to:
(a) 7.6%
(b) 9.2%
(c) 9.8%
(d) 10.9%

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