Black Inc. is a manufacturing company with a cost of debt of 6.5% . The company is financed equally by equity and debt and is subject to a tax rate of 20% . An analyst investigating the optimal capital structure for the firm has estimated that the cost of equity of the company if it had no debt would be 8% . According to Modigliani and Miller proposition II with taxes, the cost of equity of the company is closest to: Question 11 options: a) 9.2% . b) 7.3 % . c) 6.6 % .
Black Inc. is a manufacturing company with a cost of debt of 6.5% . The company is financed equally by equity and debt and is subject to a tax rate of 20% . An analyst investigating the optimal capital structure for the firm has estimated that the cost of equity of the company if it had no debt would be 8% . According to Modigliani and Miller proposition II with taxes, the cost of equity of the company is closest to: Question 11 options: a) 9.2% . b) 7.3 % . c) 6.6 % .
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Black Inc. is a manufacturing company with a cost of debt of 6.5% . The company is financed equally by equity and debt and is subject to a tax rate of 20% . An analyst investigating the optimal capital structure for the firm has estimated that the
Modigliani and Miller proposition II with taxes, the cost of equity of the company is closest to: Question 11 options: a) 9.2% . b) 7.3 % . c) 6.6 % .
Transcribed Image Text:Black Inc. is a manufacturing company with a cost of debt of 6.5%. The company is financed equally by equity and debt and is subject to a tax rate of 20%. An
analyst investigating the optimal capital structure for the firm has estimated that the cost of equity of the company if it had no debt would be 8%. According to
Modigliani and Miller proposition II with taxes, the cost of equity of the company is closest to: Question 11 options: a) 9.2%. b) 7.3%. c) 6.6%.
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