Calculate the WACC for a Firm with a Debt-Equity Ratio

question 20

Multiple Choice

Calculate the WACC for a firm with a debt-equity ratio of .6.The debt pays 12% interest and the equity is expected to return 14%.Assume a 40% tax rate and risk-free debt.

• A)11.45%
• B)12.50%
• C)13.55%
• D)14.60%

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Definitions:

Mental Model

An internal representation of the external reality, a framework that individuals use to understand and interact with the world.

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The ability to convey information to others effectively and efficiently, involving both listening actively and expressing oneself clearly.

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Groups of individuals who work together from different geographic locations, connected by electronic communication technology.

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The action of working with someone to produce or create something, often involving multiple individuals or groups to achieve a common goal.