Calculate the Weighted Average Cost of Capital (WACC)based on the Following

question 75

Multiple Choice

Calculate the weighted average cost of capital (WACC) based on the following information: the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%.

• A)7.0%
• B)10.0%
• C)13.5%
• D)17.5%

---

Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Donated Materials

Items or supplies given to an organization for free, often recognized as income at their fair value in the period received and reported in the financial statements.

Deferral Method

An accounting method where certain revenues or expenses are deferred on the balance sheet until they can be realized in the income statement.

Not-for-profit Organization

An organization that operates for purposes other than generating profit, typically focusing on social, educational, or charitable objectives.