XYZ Corporation's Capital Structure Consists of 60% Debt (With a Pretax

question 166

Multiple Choice

XYZ Corporation's capital structure consists of 60% debt (with a pretax cost of 10%) , and the balance of common equity (with a cost of 15%) . The company's income tax rate (federal and state combined) , t, is 40%. XYZ's weighted-average cost of capital (WACC) , to one decimal point, is:

• A) 8.4%.
• B) 9.0%.
• C) 9.6%.
• D) 11.4%.
• E) 12.0%.

---

Definitions:

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred, ensuring compliance with the matching principle.

Condensed Worksheet

A summarized form of a financial worksheet used for internal management purposes.

Accrual Basis

An accounting method that recognizes revenue when earned and expenses when incurred, regardless of when cash is exchanged.

Wages Expense

The cost incurred by a company for the work performed by its employees, reflected in its financial statements.