A Firm Is Considering Using Its Own Funds to Finance

question 76

Multiple Choice

A firm is considering using its own funds to finance an investment, but needs an estimate of the discount rate. Currently the firm is earning 4 percent on funds held in a bank account and 6 percent on funds held in stocks. If the firm has 20 percent of its funds in the bank account and the remaining 80 percent in stocks, what is the firm's weighted average cost of capital?

• A)5.6 percent
• B)5.8 percent
• C)4.4 percent
• D)4.2 percent

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Definitions:

Cultural Psychologists

Professional researchers who study how cultures reflect and shape the psychological processes of their members.

Co-Evolution

The process by which two or more species reciprocally affect each other's evolution through natural selection.

Nature And Culture

The interconnected relationship between the natural environment and human societal practices, beliefs, and innovations.

Automatic System

Cognitive processing that occurs subconsciously and without intentional control, often as a result of learned patterns or instincts.