Williamson, Inc., has a debt-equity ratio of 2. The firm's weighted average cost of capital is 10 percent, and its current cost of equity is 21.6 percent. The tax rate is 30 percent. What is the company's aftertax cost of debt? O A. 8.5% O B. 6% OC. 5% O D.4.2%

Williamson, Inc., has a debt-equity ratio of 2. The firm's weighted average cost of capital is 10 percent, and its current cost of equity is 21.6 percent. The tax rate is 30 percent. What is the company's aftertax cost of debt? O A. 8.5% O B. 6% OC. 5% O D.4.2%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 9P

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Question

Please answer multi-choice question in photo.

Williamson, Inc., has a debt-equity ratio of 2. The firm's weighted average cost of capital is 10 percent, and its current cost of equity is 21.6 percent. The tax rate is 30 percent.
What is the company's aftertax cost of debt?
А. 8.5%
В. 6%
ОС. 5%
O D. 4.2%

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