Maloney's, Inc

question 19

Multiple Choice

Maloney's, Inc. has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. The firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt. What is the after-tax weighted average cost of capital for Maloney's, if it is subject to a 40 percent marginal tax rate?

• A) 8.96%
• B) 11.16%
• C) 11.64%
• D) 12.60%

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Definitions:

Consumer

Someone who buys or leases real estate, goods, or services for personal, family, or household purposes.

Good Faith

A principle emphasizing honesty and sincerity in dealings, particularly in legal contracts or negotiations, without any intention to deceive or commit fraud.

Depositary Bank

A financial institution that holds securities for investors, managing dividend and interest payments.

Collection

The process of pursuing payments of debts owed by individuals or businesses.