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Princeton Corporation strives to maintain a capital structure of 46% debt and 54% equity. Investment bankers have stated that if the company were to borrow
Princeton Corporation strives to maintain a capital structure of 46% debt and 54% equity. Investment bankers have stated that if the company were to borrow money, it would have to pay an annual interest rate of 5.9% (kd). The annual return that owners would expect for providing money (ke) is 9.4%. The firms marginal income tax rate is a combined federal-plus-state 24%. What is its annual weighted average cost of capital (kA or WACC)? A. 7.79% B. 7.51% C. 6.75% D. 7.65% E. 7.14%
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