What Is the WACC for a Firm Using 55% Equity

question 34

Multiple Choice

What is the WACC for a firm using 55% equity with a required return of 15%, 35% debt with a required return of 8%, 10% preferred stock with a required return of 10%, and a tax rate of 35%?

• A) 10.72%
• B) 11.07%
• C) 11.70%
• D)12.05%

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Definitions:

Promissory Note

A financial instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand.

Credit Card Sales

Transactions where customers use credit cards to purchase goods or services, requiring merchants to process payments through a credit card network.

Direct Write-Off Method

An accounting method where uncollectible debts are charged directly to expense as they are identified.

Trade Receivables

The total amount of money owed to a company by its customers for goods or services delivered on credit.