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MC Question 19

On a market value basis, GFV Co is financed 70% by equity and 30% by debt. The company has an after-tax cost of debt of 6% and an equity beta of 1·2. The risk-free rate of return is 4% and the equity risk premium is 5%.

What is the after-tax weighted average cost of capital of GFV Co?

A. 5·4%
B. 7·2%
C. 8·3%
D. 8·8%