A Firm Requires an Investment of $40 000 and Borrows

question 78

Multiple Choice

A firm requires an investment of $40 000 and borrows $10 000 at 8%. If the return on equity is 20%, what is the firm's pre-tax WACC?

• A)15%
• B)16%
• C)14%
• D)17%

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Definitions:

Area Representation

A system of electing representatives from specific geographical areas, typically used in legislative bodies.

Price

The expenditure necessary to secure a good or service.

Consumer Surplus

The discrepancy between the price consumers are ready to pay for a good or service and the price they end up paying.

Area Representation

The graphical depiction of quantitative relationships, often used in statistical and economic models to illustrate areas under curves or between lines.