The required return on assets is 18%. The firm can borrow at 12.5%; firm's target debt to value ratio is 3/5. The corporate tax rate is 34%, and the risk-free rate is 4% and the market risk premium is 9.2 percent. What is the weighted average cost of capital?
A) 12.15%
B) 13.02%
C) 14.33%
D) 23.45%
E) None of the above
Correct Answer:
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