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Companies U and L are identical in every respect except that U is unlevered while L has $12 million of 7% bonds outstanding. Assume that

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Companies U and L are identical in every respect except that U is unlevered while L has $12 million of 7% bonds outstanding. Assume that all of the original M&M assumptions are met, that EBIT is $3 million for both companies and that the cost of equity to company U is 9%. If there are no corporate or personal income taxes what is the WACC for firm U. 7% 9% 10.125% O None of the above

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