How Much Is Added to a Firm's Weighted Average Cost

question 110

Multiple Choice

How much is added to a firm's weighted average cost of capital for 45% debt financing with a required rate of return of 10% and a tax rate of 35%?

• A)1.29%
• B)2.93%
• C)3.50%
• D)4.50% Component cost of debt = .45 x (1 - .35).10
• = )45 x (.65 x .10)
• = )45 x .065