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:

Taxable Value

The assessed value of an asset or property that is used to determine the amount of tax owed.

Charitable Bequests

Gifts left in a will or estate plan to a charity or nonprofit organization.

Funeral Expenses

Funeral expenses are the costs incurred in arranging and conducting a funeral, including but not limited to services, casket, and burial or cremation.