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Assume the M&M world with perfect capital markets. A firm has a market value of equity of $40,000. It borrows $8000 at 7%. If the

Assume the M&M world with perfect capital markets. A firm has a market value of equity of $40,000. It borrows $8000 at 7%. If the unlevered cost of equity is 16%, what is the firms cost of equity capital?

A.8.9%

B.21.4%

C.17.8%

D.24.9%

What is this firms (pretax) WACC (RA)?

A.16%

B.17.8%

C.7%

D.15%

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