Compute the June 20xx Cost of Capital (Rounded to Nearest

question 60

Multiple Choice

Compute the June 20xx cost of capital (rounded to nearest percent) for an investment center with the following information: $\begin{array}{lr}\text { Pre-tax operating income for June 20xx } & \$ 17,500,000 \\\text { Assets at June } 30,20 \mathrm{xx} & 6,200,000 \\\text { Current liabilities at June } 30,20 \mathrm{xx} & 4,000,000 \\\text { Long-term liabilities at June } 30,20 \mathrm{xx} & 1,500,000 \\\text { Income tax expense for June } 30,20 \mathrm{xx} & 5,000,000 \\\text { EVA } & 11,940,000\end{array}$

• A) 10 percent
• B) 25 percent
• C) 13 percent
• D) 17 percent

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Definitions:

Fraud

A deliberate deception to secure unfair or unlawful gain, often at the expense of others.

Negligence

Not acting with the care expected from a reasonably prudent person in identical situations.

Cattle Feed

Food specifically prepared and provided for the nourishment and growth of cattle.

Poisoned Feed

A harmful or toxic compound mixed with livestock feed that can damage or kill animals.