Find the weighted average cost of capital of the company

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Question 1: BNT is a 100% equity financed firm and its cost of equity is 10%. The manager of BNT plans to raise debt to increase the Debt/Equity ratio of the company to 0.5. The cost of debt is 5%. Assuming a perfect capital market so that the M&M theory holds. The weighted average cost of capital of the company after the borrowing will be closest to:

Select one:

Option a. 6%

Option b. 5%

Option c. 10%

Option d. 9%

Option e. 8%

Reference no: EM132505414

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