Tax Rate = 35%

RFR = 8%

Equity Risk Premium = 7%

Coupon Rate on the Debt = 10%

Preferred Stock is 12% Preferred

Beta = 1.20

Dividends = $5 per share

Earnings = $10 per share

ROE = 18%

Debt is 40% of the Capital Structure

Preferred Stock is 10% of the Capital Structure

Equity (common stock) is 50% of the Capital Structure

What is the After Tax Cost of Debt?

a)12.0%

b)16.4%

c)10.0%

d)6.5%