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What is its annual weighted average cost of capital

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Question - Locust Lotion Corporation strives to maintain a capital structure of 47% debt and 53% equity. Investment bankers have stated that if the company were to borrow money, it would have to pay an annual interest rate of 6.6% (kd). The annual return on equity that common stockholders would expect for providing money (ke) is 9.8%. The firm's marginal income tax rate is a combined federal-plus-state 25%. What is its annual weighted average cost of capital (kA or WACC)? 

A. 8.30%

B. 7.23%

C. 8.10%

D. 7.52%

E. 8.20%

Reference no: EM132957385

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