The firm's sales are $100M and its variable costs are 50% of sales. The fixed costs are 15M and its interest expenses are 3M. Which of the following statements is correct? A. The operating leverage is 1.43 B. The financial leverage is 1.21 C. The financial leverage is 1.76 D. The operating leverage is 1.09 QUESTION 20 The company, Theta, is expected to have an operating cash flow of $1 million next year. It issued 1 million bonds before and the bond is currently selling at a price $900 (par value $1000) per unit. The bond is expected to retire in 10 years with a coupon rate of 12%. The coupon is paid semiannually. Common shares of Theta is selling at $100 per share and there are 11 million shares outstanding. The return on unlevered equity is 20% and the tax rate is 40%. What is the firm's cost of capital? A 12.35% B. 20.16% C.16.40% D. 18.90%

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