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:

Lipset

Seymour Martin Lipset was a political sociologist known for his work on the social bases of politics, social stratification, public opinion, and the sociology of intellectual life.

Sociologist

A social scientist who studies the societal behaviors, structures, and functions of human societies and interactions.

Assimilation

A one-way process that occurs when a minority group sheds its differences and assumes the traits of the dominant group.

Dominant Culture

The prevailing cultural practices, beliefs, and values in a given society that influence norms and behaviors, often marginalizing minority groups.