Calculate the WACC for a Firm That Pays 10% on Its

question 87

Multiple Choice

Calculate the WACC for a firm that pays 10% on its debt,requires an 18% rate of return on its equity,finances 45% of the market value of its assets with debt,and has a tax rate of 35%.

• A) 12.83%
• B) 14.00%
• C) 14.40%
• D) 18.20%

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Definitions:

Quiet Period

The quiet period is a term used in finance, referring to a timeframe where a company about to go public is restricted in its ability to publicly discuss its business, to ensure fairness in the dissemination of company information.

1933 Act

The Securities Act of 1933, a federal law enacted as part of the New Deal, which regulates the offer and sale of securities to protect investors from fraud.

Exempt

To free from an obligation, duty, or liability to which others are subject.

Registration Requirements

Legal mandates for businesses or individuals to register with governmental authorities for licensure, tracking, or tax purposes.