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

question 128

Multiple Choice

XYZ Corporation's capital structure consists of 60% debt with a pretax cost of 10%,and the balance by common equity,with a cost of 15%.The company's marginal tax rate (federal and state combined) is 50%.XYZ's weighted-average cost of capital (WACC) is:

• A)9.0%
• B)10.0%
• C)12.0%
• D)12.5%

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Definitions:

Rent Out

The act of leasing or renting one's property to another party in exchange for payment.

Joint Costs

Costs that are incurred in the process of producing two or more products or services simultaneously and are not readily assignable to individual products.

Inventory Valuation

The method used by businesses to assess the value of their inventory, taking into account the cost of acquiring or producing the goods and any market changes.

Profitability of Joint Products

The assessment of earnings from products that are produced simultaneously from the same process and cannot be distinguished cost-wise until a certain point of production.