Suppose That Glamour Nails, Inc

question 95

Multiple Choice

Suppose that Glamour Nails, Inc.'s capital structure features 30 percent equity, 70 percent debt, and that its after-tax cost of debt is 4 percent, while its cost of equity is 10 percent. If the appropriate weighted average tax rate is 21 percent, what will be Glamour Nails' WACC?

• A) 4.78 percent
• B) 5.80 percent
• C) 7.94 percent
• D) 7.00 percent

---

Definitions:

Security Agreement

An agreement in which the debtor gives the secured interest to the secured party.

Debtor

An individual or entity that owes money or is under financial obligation to another, typically as a result of borrowing funds or purchasing goods/services on credit.

Collateral

Assets that are offered to secure a loan or other credit and that can be seized by the lender if the loan is unpaid.

Secured Parties

Creditors who have the right to seize collateral if a debtor fails to fulfill their obligation under a secured agreement.