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

question 27

Multiple Choice

Compute the June 20xx cost of capital (rounded to nearest percent) for an investment center with the following information: $\begin{array}{|lr|}\hline \text { Pre-tax operating income for June 20xx } & \$ 17,500,000 \\\text { Assets at June 30, 20xx } & 6,200,000 \\\text { Current liabilities at June 30,20xx } & 4,000,000 \\\text { Long-term liabilities at June 30,20xx } & 1,500,000 \\\text { Income tax expense for June 30,20xx } & 5,000,000 \\\text { EVA } & 12,040,000 \\\hline\end{array}$

• A) 8 percent
• B) 21 percent
• C) 10 percent
• D) 14 percent

---

Definitions:

SEC

The U.S. Securities and Exchange Commission, a federal agency responsible for enforcing federal securities laws and regulating the securities industry.

Bonus

An additional payment or reward given to employees as an incentive or reward for performance.

Partnership

A form of business organization where two or more individuals agree to share the profits and losses of a business venture.

Noncash Assets

Assets that cannot be easily converted into cash, such as equipment, real estate, and intellectual property.