Question: A firm has zero debt and a weighted average cost of capital of 11.8 percent. The firm is considering a new capital structure with a

A firm has zero debt and a weighted average cost of capital of 11.8 percent. The firm is considering a new capital structure with a debt-equity ratio of 0.7. The interest rate on the debt would be 5.2 percent and the corporate tax rate is 34 percent. What would be the cost of equity with the new capital structure?

15.54%

14.11%

14.85%

15.70%

15.02%

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