What Is the WACC for a Firm with 40% Debt

question 40

Multiple Choice

What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective costs for these components are 9.23% before tax, 12% after tax, and 18% before tax? The firm's tax rate is 35%.

• A) 9.48%
• B) 11.16%
• C) 12.00%
• D)15.60%

---

Definitions:

Necessary

Something essential or required for a particular purpose or outcome, often in the context of achieving goals or fulfilling conditions.

Proper Clause

The clause in the U.S. Constitution granting Congress the power to make all laws which shall be necessary and proper for carrying into execution its powers.

Elastic Clause

The provision in the U.S. Constitution that grants Congress the power to pass all laws necessary and proper for carrying out its enumerated powers, also known as the Necessary and Proper Clause.

Full Faith

A principle requiring states to respect and enforce the public acts, records, and judicial rulings of other states, derived from the U.S. Constitution.