Use the Following Information to Answer the Next Question

question 3

Multiple Choice

Use the following information to answer the next question:
Operating assets = $3,000
Operating liabilities = $1,000
Book value of debt = Market value of debt = $1,500
Book value of equity = $500
Market value of equity = $900
Value of operating leases = $2,000
After-tax required return on unsecured debt = 6%
Required return on equity (CAPM ) = 13%
After-tax required return on secured debt = 5%
-What are (1 ) the WACC before adjustment for leases and (2 ) the WACC after adjustment for leases?

• A)WACC before adjustment for leases = 8.63 percent;WACC after adjustment for leases = 6.98 percent.
• B)WACC before adjustment for leases = 6.63 percent;WACC after adjustment for leases = 6.98 percent.
• C)WACC before adjustment for leases = 6.93 percent;WACC after adjustment for leases = 8.63 percent.
• D)WACC before adjustment for leases = 8.63 percent;WACC after adjustment for leases = 8.98 percent.

---

Definitions:

Catholic Dissidents

Individuals or groups who challenge or dissent from the teachings and authority of the Catholic Church.

Trading Companies

Businesses specialized in facilitating international trade by dealing with different aspects such as import-export operations, and sometimes investing in commercial ventures.

Dutch Trading Routes

Networks used by the Netherlands in the 16th to 19th centuries for commerce and colonization, pivotal in establishing Dutch global trade dominance, particularly in spices and slaves.

New Netherland

A 17th-century colonial province of the Dutch Republic that included parts of modern-day New York, New Jersey, Pennsylvania, Maryland, Connecticut, and Delaware.