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%