Weighted cost of capital for new division after-tax cost

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Reference no: EM13826235

Technico plans to start a new product division that will have a capital structure of 60 percent debt and 40 percent equity. The levered beta for this division has been estimated to be 2.10. What will be Technico's weighted cost of capital for this new division if the after-tax cost of debt is 16 percent, the risk-free rate is 3 percent, and the market risk premium is 10 percent?

A. 40.00%

B. 19.20%

C. 33.70%

D. 16.68%

Reference no: EM13826235

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