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ASSUME THAT XYZ CORPORATION IS A LEVERAGED COMPANY WITH THE FOLLOWING INFORMATION:
K1 = COST OF CAPITAL FOR XYZ = 13%
i = BEFORE TAX BORROWING COST = 8%
t = MARGINAL CORPORATE INCOME TAX RATE = 30%
IF XYZ DEBT-TO-MARKET-VALUE RATIO IS 40%, THEN THE WEIGHTED AVERAGE COST OF CAPITAL, K, IS:
Select one: a. 12% b. 9% c. 10% d. 8%
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