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

question 21

Multiple Choice

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

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

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Definitions:

Sublet

The act of a tenant renting out their leased premises to another party for a period within the lease term.

Pay Rent

The act of providing a predetermined amount of money, typically monthly, to a landlord in exchange for the right to occupy a property.

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A legal concept in property law that refers to the relationship or connection between parties whose estates possess rights or obligations that are derivative from the same property.

Privity of Contract

A doctrine in contract law that restricts the rights or duties under a contract to the parties that agreed to it.