SIROM Scientific Solutions Has $12 Million of Outstanding Equity and $4

question 99

Multiple Choice

SIROM Scientific Solutions has $12 million of outstanding equity and $4 million of bank debt. The bank debt costs 4% per year. The estimated equity beta is 1. If the market risk premium is 8% and the risk-free rate is 4%, compute the weighted average cost of capital if the firm's tax rate is 30%.

• A) 8.73%
• B) 9.22%
• C) 9.70%
• D) 10.67%

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Definitions:

Evacuation system

A set of procedures and equipment designed for the safe exit of people from a building or area in case of emergency.

Interchangeable

Capable of being exchanged or substituted for each other without making any difference or without altering the function.

Collection tubes

Tubes specifically designed for the collection and transport of specimens, such as blood, for medical testing.

Calibrated

Adjusted precisely for a particular function.