Macdonald has found that its common equity capital shares have a beta equal to 1.5 while the risk-free return is 8 percent and the expected return on the market is 14 percent. Its cost of debt financing is 12 percent. If the firm is financed with OMR 120,000,000 of common shares (market value) and OMR 80,000,000 of debt, then what is the after-tax weighted average cost of capital for Macdonald if it is subject to a 35 percent marginal tax rate? Select one: O a. None of these O b. 13.32 % O c. 12.25 % O d. 14.04 %

Macdonald has found that its common equity capital shares have a beta equal to 1.5 while the risk-free return is 8 percent and the expected return on the market is 14 percent. Its cost of debt financing is 12 percent. If the firm is financed with OMR 120,000,000 of common shares (market value) and OMR 80,000,000 of debt, then what is the after-tax weighted average cost of capital for Macdonald if it is subject to a 35 percent marginal tax rate? Select one: O a. None of these O b. 13.32 % O c. 12.25 % O d. 14.04 %

Foundations of Business - Standalone book (MindTap Course List)

4th Edition

ISBN:9781285193946

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Chapter15: Using Management And Accounting Information

Section: Chapter Questions

Problem 4DQ

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