Springfield Corporation,whose Tax Rate Is 30%,has Two Sources of Funds

question 56

Multiple Choice

Springfield Corporation,whose tax rate is 30%,has two sources of funds: long-term debt with a market value of $6,000,000 and an interest rate of 8%,and equity capital with a market value of $15,000,000 and a cost of equity of 12%.What is Springfield's weighted average cost of capital (WACC) ?

• A) 9.17%
• B) 9.57%
• C) 10.17%
• D) 11.17%

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Definitions:

Red Sea

A seawater inlet of the Indian Ocean, lying between Africa and Asia, known for its unique marine life and extensive coral reefs.

Atoll

A curved to roughly circular reef that encloses a shallow, inner lagoon and low islands.

Continental Crust

The thick, granitic, and less dense part of the Earth's crust that forms the continents and continental shelves.

Mediterranean Sea

A sea connected to the Atlantic Ocean, surrounded by the Mediterranean region and almost completely enclosed by land, playing a crucial role in human history through trade and cultural exchange.