1. The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8% pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be:
A. 8.63%.
B. 9.12%.
C. 10.45%.
D. 13.80%.
2. What is the pretax cost of debt for a firm in the 35% tax bracket that has a 10% aftertax cost of debt?
A. 5.85%
B. 12.15%
C. 15.38%
D. 25.71%