What Is the WACC for a Firm with Equal Amounts

question 110

Multiple Choice

What is the WACC for a firm with equal amounts of debt and equity financing,a 16% before-tax company cost of capital,a 35% tax rate,and a 10% coupon rate on its debt that is selling at par value?

• A) 10.40%
• B) 14.25%
• C) 15.13%
• D) 16.00%

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Definitions:

Cognition

Acquiring insight and knowledge through the processes of thinking, undergoing experiences, and using the senses.

Mental Activity

Any cognitive process that involves thinking, reasoning, problem-solving, decision-making, or the processing of information.

Availability Heuristic

A cognitive shortcut that depends on the first examples that spring to mind when considering a particular subject, idea, approach, or choice.

Confirmation Bias

The disposition to seek, grasp, esteem, and recount information that confirms existing preconceptions or theories.