CORRECT ANSWER B. ANGELA’S LONG-TERM DEBT IS 45% OF ITS CAPITAL...
138.
Correct answer b. Angela’s long-term debt is 45% of its capital structure as shown below.
Cost of debt
= .08 x (1 - .4)
= .048
WACC
.15X + .048 (1-X) = .1041
.102X
= .0561
Preferred equity
X
= .55
Debt
1 – X
= .45