The Backwoods Lumber Co.has a debt-equity ratio of .80.The firm's required return on assets is 12% and its cost of equity is 16.00%.What is the pre-tax cost of debt based on MM Proposition II with no taxes?
A)6.76%
B)7.00%
C)7.25%
D)7.40%
E)7.50%

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The Answer of The Backwoods Lumber Co.has a debt-equity ratio of .80.The firm's required return on assets is 12% and its cost of equity is 16.00%.What is the pre-tax cost of debt based on MM Proposition II with no taxes?
A)6.76%
B)7.00%
C)7.25%
D)7.40%
E)7.50%