A Firm Requires an Investment of $40 000 and Borrows

question 78

Multiple Choice

A firm requires an investment of $40 000 and borrows $10 000 at 8%. If the return on equity is 20%, what is the firm's pre-tax WACC?

• A)15%
• B)16%
• C)14%
• D)17%

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Definitions:

Ace of Hearts

A playing card in the deck of standard playing cards, distinguished by a single heart symbol and an ace rank.

Face Card

In a standard deck of playing cards, it refers to any jack, queen, or king, each of which has a picture of a face.

Ace

In card games, an ace refers to a playing card that typically ranks the highest in its suit.

Lowest 4%

Refers to the bottom 4% of data points in a distribution, highlighting the far left end of the data spectrum or values significantly below the median.