What is the maximum rate that can be paid on debt and maintain a WACC of 14% with an expected return on equity of 19% in a firm with a debt-to-asset ratio of 60%? Ignore taxes.
A) 6.50%
B) 9.90%
C) 10.67%
D)11.14%

Name: What is the maximum rate that can be paid on debt and maintain a WACC of 14% with an expected return on equity of 19% in a firm with a debt-to-asset ratio of 60%? Ignore taxes. A) 6.50% B) 9.90% C) 10.67% D)11.14%
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Quizplus · Accepted Answer

0.14 = (1 - 0.60)(0.19) + 0.60(R_d); R_d = 0.1067, or 10.67%

What Is the Maximum Rate That Can Be Paid on Debt