What Is the WACC for a Firm Using 55% Equity

question 114

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% WACC = (.35 x (1 - .35).08) + (.1 x .1) + (.55 x .15)
• = 1)82% + 1.0% + 8.25%

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Definitions:

Price

The amount of money or value exchanged for the provision or acquisition of a good or service.

Surplus Amount

The excess of quantity supplied over quantity demanded in a market, often leading to lower prices.

Inferior Good

A type of good for which demand decreases as the income of the consumer increases.

Income Increases

The rise in the amount of money received, typically on a regular basis, for work or through investments.