Find the Weighted Average Cost of Capital for a Firm

question 12

Multiple Choice

Find the weighted average cost of capital for a firm that has a debt-to-equity ratio of 1½, a tax rate of 34%, a levered cost of equity of 12% and an after-tax cost of debt of 8%.

• A)9.6%
• B)7.968%
• C)14%
• D)none of the above

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Definitions:

Raw Materials Inventory

Items and substances in stock that will be used in the manufacturing process to create goods and products.

Net Operating Income

A company's revenue minus its operating expenses, excluding taxes and interest.

Work in Process Inventory

Items that are in the process of being manufactured but are not yet complete.

Labor Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, often analyzed in cost accounting or budgeting.