A firm has a WACC of 14%,an expected return on equity of 19%,and a debt-to-asset ratio of 60%.If the firm does not pay tax,what is the interest rate on the debt?
A) 6.50%
B) 9.90%
C) 10.67%
D) 11.14%

Name: A firm has a WACC of 14%,an expected return on equity of 19%,and a debt-to-asset ratio of 60%.If the firm does not pay tax,what is the interest rate on the debt? A) 6.50% B) 9.90% C) 10.67% D) 11.14%
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Question

Quizplus · Accepted Answer

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

A Firm Has a WACC of 14%,an Expected Return on Equity