Find the Weighted Average Cost of Capital for a Firm

question 36

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 a pre-tax cost of debt of 10%.

• A)9.6%
• B)7.968%
• C)8.76%
• D)none of the above

---

Definitions:

Slope

The gradient or tilt of a line on a graph, indicating the relationship between two variables.

Y-Intercept

This refers to the point on a graph where the line crosses the Y-axis, typically representing the value of the dependent variable when the independent variable is zero.

Regression Equation

A mathematical formula used to predict a value of a dependent variable based on the value(s) of one or more independent variables.

Scatter Plot

A graphical representation of the relationship between two quantitative variables, where each point represents an observation.