A firm has a capital structure of 30 debt and 70 equity new, Ask an Expert

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A firm has a capital structure of 30% debt and 70% equity. New bonds will have an after tax cost of 7.5% and the shareholders require a return on their investment of 18.5%. Assuming that the firm will not need to sell new shares, what is their weighted average cost of capital?

A. 15.20%
B. 21.00%
C. 26.00%
D. 10.80%

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