A Firm Has a Total Market Value of $10 Million

question 80

Multiple Choice

A firm has a total market value of $10 million while its debt has a market value of $4 million. What is the after-tax weighted average cost of capital if the before-tax cost of debt is 10 percent, the cost of equity is 15 percent, and the tax rate is 21 percent? (Round to the nearest decimal place) .

• A)13.0 percent
• B)12.2 percent
• C)8.8 percent
• D)10.4 percent

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Definitions:

Body Fluids

Liquids that are found within the bodies of living organisms, including blood, saliva, and cerebrospinal fluid.

Buffer

A chemical substance that helps maintain a stable pH in a solution by neutralizing small amounts of added acid or base.

pH

A scale used to specify the acidity or basicity of an aqueous solution, with low values indicating acidity and high values, basicity.

Solutions

Homogeneous mixtures composed of two or more substances where one substance, the solute, is dissolved in another, the solvent.