What Is the Weighted Average Cost of Capital After Taxes

question 34

Multiple Choice

What is the weighted average cost of capital after taxes if the desired capital structure is 40% debt and 60% equity,investors require a 10% pre-tax return from debt and 25% from equity,and the tax rate is 30%?

• A) 18%
• B) 20%
• C) 11%
• D) 15%
• E) 19%

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Definitions:

GAAP

A collection of norms and guidelines utilized in the United States for the purposes of financial reporting and accounting, known as the Generally Accepted Accounting Principles.

Available-For-Sale

A classification of financial assets indicating that they are not held for trading purposes nor intended to be held to maturity, but are available for sale if needed.

Disclosures

A requirement for companies to present all relevant financial and operational information in their financial reports to ensure transparency and fairness.

Carrying Value

The book value of assets and liabilities reported on the balance sheet, considering factors like depreciation or amortization.