Question 10 Torquay plc exists in a Modigliani and Miller (1958, 1963) world, except that corporate taxes exist at the rate of 30%. The cost of capital for an all-equity financed firm in this world is 18% p.a., and the pre-tax market cost of debt is 9% p.a. Torquay plc is funded by way of 90 million equity and 50 million debt (both at market values). What is Torquay plc's cost of equity capital? ABCDE 25.5% 24% 23% 21.5% 20% END of SECTION A