Precision Cuts Has a Target Debt-Equity Ratio of 0

question 74

Multiple Choice

Precision Cuts has a target debt-equity ratio of 0.55.Its cost of equity is 15.4 percent,and its pretax cost of debt is 7.8 percent.If the tax rate is 32 percent,what is the company's WACC?

• A)10.20 percent
• B)10.72 percent
• C)10.91 percent
• D)11.28 percent
• E)11.82 percent

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Definitions:

Income Statement Accounts

Accounts that reflect income, expenses, gains, and losses, which are used to determine the net income of a business.

Deferred Revenue

Income received by a company for products or services yet to be delivered or completed, considered a liability until the revenue is earned.

Unearned Rent

Income received by a property owner for which the services (use of property) have not yet been provided.

Expense Accounts

Accounts used to track money spent or costs incurred in a business's operational activities.