The Required Return on Assets Is 18

question 31

Multiple Choice

The required return on assets is 18%. The firm can borrow at 12.5%; firm's target debt to value ratio is 3/5. The corporate tax rate is 34%, and the risk-free rate is 4% and the market risk premium is 9.2 percent. What is the weighted average cost of capital?

• A)12.15%
• B)13.02%
• C)14.33%
• D)23.45%
• E)None of the above

---

Definitions:

Z Test

This method tests if two populations' means differ, assuming known variances and a large sample size.

Group 1

A designation for the first cohort or category in an experimental or observational study, often used as a reference or control group.

Multinomial Population

A population in a statistical model where outcomes can fall into three or more categories.

Normal Population

A population in which the data follows a normal distribution, characterized by a bell-shaped curve.