Using the WACC in Practice: Swirlpool Ltd Has Found That

question 16

Multiple Choice

Using the WACC in practice: Swirlpool Ltd has found that its cost of equity capital is 18 percent, and its cost of debt capital is 8 percent. If the company is financed with 60 percent ordinary shares and 40 percent debt, then what is the after-tax weighted average cost of capital for Swirlpool if it is subject to a 40 percent company tax rate?

• A) 10.37%
• B) 12.00%
• C) 12.72%
• D) 14.00%

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Definitions:

Chitin

A long-chain polymer of a glucose derivative, which is a principal component of the cell walls of fungi and the exoskeletons of insects and crustaceans.

Asci

Specialized spore-bearing cells found in the fruiting bodies of ascomycete fungi.

Basidia

Specialized spore-producing structures found in Basidiomycota fungi, typically shaped like a club.

Coenocytic

Refers to a cellular structure containing multiple nuclei within a shared cytoplasm, typically found in some fungi and algae.