Solve for the weighted average cost of capital.

10.60	%	=	K1	=	cost of equity capital for a leveraged firm
1/3		=		=	debt-to-total-market-value ratio
8.0	%	=	i	=	before-tax borrowing cost
40.0	%	=		=	marginal corporate income tax rate

Multiple Choice

• 8.00 percent

• 7.33 percent

• 8.67 percent

• 7.60 percent