The Company Cost of Capital, After Tax, for a Firm

question 74

Multiple Choice

The company cost of capital, after tax, for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:

• A)7.02%
• B)9.12%
• C)10.80%
• D)13.80%

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Definitions:

Recording

The process of documenting financial transactions in the accounting records of a business.

Consolidation Entry A

An accounting entry made to adjust or combine financial information from separate entities during consolidation.

Consolidation Worksheet

A tool used in the preparation of consolidated financial statements that helps in adjusting and combining the financial information of parent and subsidiary entities.

Purpose

The objective or intended outcome that an organization or plan is meant to achieve.