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%.

Part A: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%

Part B:What is this firms (pretax) WACC (R_A)?

A. 16%

B. 17.8%

C. 7%

D. 15%