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:

Evolutionary Perspective

A theory in psychology that examines human thoughts and behaviors in terms of natural selection and survival mechanisms.

Biologically Predisposed

Having an innate tendency or susceptibility to certain conditions, behaviors, or responses based on genetic factors.

Offspring

The children or young born to a person, animal, or plant.

Gender-typed Mates

The preference for choosing partners who conform to traditional gender roles and behaviors.