Using the WACC in Practice: Maloney's, Inc

question 86

Multiple Choice

Using the WACC in practice: Maloney's, Inc., has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. If the firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt, then 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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