Question $4$

$1$ pts

A company is $40\%$ financed by debt at an interest rate of $10\%.$ The risk free rate

is also $10\%.$ The expected market risk premium is $8\%,$ and the beta of the

company's common stock is $0\mathrm{.}5.$

What is the company cost of capital? Type your answer as a percentage using

two decimal places. Example $99\mathrm{.}12.$ You do not need to type the $\%$ sign

$[$costofcapital$]\%.$ You are not given a tax rate here, so the question is seeking a

general understanding of "cost of capital". In a more technical approach to

calculating the weighted average cost of capital $($WACC$),$ you would use the

after$-$tax cost of debt!