lack Inc. is a manufacturing company with a cost of debt of 6.5%. The company...
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lack 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:
|
| 6.6%. |
|
| 7.3%. |
|
| 9.2%. |
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