The Green Paddle has a cost of equity of 12.1 percent and a pre-tax cost of debt of 7.6 percent.The debt-equity ratio is 0.65 and the tax rate is 32 percent.What is Green Paddle's unlevered cost of capital?
A)10.72 percent
B)11.85 percent
C)14.29 percent
D)14.46 percent
E)15.08 percent

Question

Quizplus · Accepted Answer

R_E = 0.121 = R_U + (R_U - 0.076) × 0.65 × (1 - 0.32); R_U = 10.72 percent

The Green Paddle Has a Cost of Equity of 12