Find the Weighted Average Cost of Capital for a Firm

question 46

Multiple Choice

Find the weighted average cost of capital for a firm that has a debt-to-equity ratio of 2,a tax rate of 40 percent,a levered cost of equity of 12 percent and a pre-tax cost of debt of 9 percent.

• A)7.6 percent
• B)7.968 percent
• C)10 percent
• D)none of the options

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Definitions:

Credit Memo

A document issued by a seller that reduces the amount a buyer owes, typically related to returns or adjustments.

Note Receivable

A financial asset representing a written promise to receive a certain amount of money at a future date or on demand.

Petty Cash

A small amount of cash kept on hand in a business for minor, routine expenses, managed through a system involving vouchers.