A Firm Requires an Investment of $30,000 and Borrows $15,000

question 3

Multiple Choice

A firm requires an investment of $30,000 and borrows $15,000 at 7%. If the return on equity is 19%, what is the firm's pretax WACC?

• A) 13%
• B) 6.5%
• C) 15.6%
• D) 18.2%

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Definitions:

Filing

The act of officially submitting documents or records to a court or administrative agency.

Preferential Payment

A payment made to a creditor before a bankruptcy filing that is considered unfair to other creditors.

Transferred Property

Assets or rights that have been legally moved from one owner to another through a sale, gift, or inheritance.

Preexisting Debt

Financial obligations or liabilities that exist before a specified event or transaction, such as taking out a new loan.