SIROM Scientific Solutions Has $10 Million of Outstanding Equity and $5

question 55

Multiple Choice

SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 2. If the market risk premium is 9% and the risk-free rate is 3%, compute the weighted average cost of capital if the firm's tax rate is 30%.

• A) 15.17%
• B) 15.93%
• C) 16.68%
• D) 17.44%

---

Definitions:

Ownership Structure

The arrangement or framework that details the distribution of ownership and the specifics of shareholders' rights in a corporation.

Deferred Income Tax Asset

An accounting term that refers to a situation where a business has paid more taxes to the government than it currently owes due to differences in accounting practices.

Recording Conditions

The criteria or standards that must be met for transactions to be recorded in the financial statements.