Generic Health Services has a target capital structure of 30 percent debt and 70 percent equity. Its cost of debt estimate is 10 percent, and its cost of equity estimate is 16 percent. It pays federal, state, and local taxes at a 30 percent marginal rate. What is the firm's corporate cost of capital? O (a) 12.1 percent O (b) 12.5 percent O (c) 13.3 percent O (d) 13.8 percent O (e) 14.0 percent
Generic Health Services has a target capital structure of 30 percent debt and 70 percent equity. Its cost of debt estimate is 10 percent, and its cost of equity estimate is 16 percent. It pays federal, state, and local taxes at a 30 percent marginal rate. What is the firm's corporate cost of capital? O (a) 12.1 percent O (b) 12.5 percent O (c) 13.3 percent O (d) 13.8 percent O (e) 14.0 percent
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
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Transcribed Image Text:Generic Health Services has a target capital structure of 30 percent debt and 70 percent equity. Its cost of debt estimate is 10
percent, and its cost of equity estimate is 16 percent. It pays federal, state, and local taxes at a 30 percent marginal rate. What is the
firm's corporate cost of capital?
O (a) 12.1 percent
O (b) 12.5 percent
O (c) 13.3 percent
O (d) 13.8 percent
O (e) 14.0 percent
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