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The market value of XYZ Corporation's common stock is $60 million and the market value of its risk-free debt is $40 million. The beta of
The market value of XYZ Corporation's common stock is $60 million and the market value of its risk-free debt is $40 million. The beta of the company's common stock is 0.8 and the expected market risk premium is 10 percent. If the Treasury bill rate is 6 percent, what is the firm's cost of capital? (Assume no taxes.)
A. 14.0%
B. 9.2%
C. 10.8%
D. 8.1%
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