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tia_tia [17]
3 years ago
15

A firm has an equity multiplier of 1.57, an unlevered cost of equity of 14 percent, a levered cost of equity of 15.6 percent, an

d a tax rate of 21 percent. What is the cost of debt
Business
1 answer:
Elanso [62]3 years ago
6 0

Answer:

10.45%

Explanation:

Calculation to determine the cost of debt

B/S = 1.57 − 1

B/S = .57

.156 = .14 + .57(1 −.21)(.14 − RB)

.156 = .14 + .57(.79)(.14 − RB)

RB = .1045*100

RB= 10.45%

Therefore the cost of debt is 10.45%

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Irina-Kira [14]

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