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. 9%

b. 10%

c. 12%

d. 8%