The Pizza Palace has a cost of equity of 15.3 percent and an unlevered cost of capital of 11.8 percent. The company has $22,000

The Pizza Palace has a cost of equity of 15.3 percent and an unlevered cost of capital of 11.8 percent. The company has $22,000 in debt that is selling at par value. The levered value of the firm is $41,000 and the tax rate is 34 percent. What is the pre-tax cost of debt?    A.  4.73 percent B.  6.18 percent C.  6.59 percent D.  7.22 percent E.  9.92 percent RE = 0.153 = 0.118 + (0.118 - RD) × [$22,000/($41,000 - $22,000)] × (1 - 0.34); RD = 7.22 percent

75.

The Green Paddle has a cost of equity of 12.1 percent and a pre-tax cost of debt of 7.6 percent. The debt-equity ratio is 0.65 and the tax rate is 32 percent. What is Green Paddle's unlevered cost of capital?    A.  10.72 percent B.  11.85 percent C.  14.29 percent D.  14.46 percent E.  15.08 percent RE = 0.121 = RU + (RU - 0.076) × 0.65 × (1 - 0.32); RU = 10.72 percent

76.

Bob's Warehouse has a pre-tax cost of debt of 8.4 percent and an unlevered cost of capital of 14.6 percent. The firm's tax rate is 37 percent and the cost of equity is 18 percent. What is the firm's debt-equity ratio?    A.  0.72 B.  0.76 C.  0.79 D.  0.82 E.  0.87 RE = 0.18 = 0.146 + (0.146 - 0.084) × D/E × (1 - 0.37); D/E = 0.87