The Wintergreen Organization,whose tax rate is 30%,generates two sources of funds: long-term debt with a market value of $7,000,000 and an interest rate of 8%,and equity capital with a market value of $12,000,000 and a cost of equity of 11%.What is Wintergreen's weighted cost of capital (WACC)?
A).050
B).060
C).070
D).080
E).090

Question

Quizplus · Accepted Answer

E)[$7,000,000 × (1 - .30)× (.08))+ ($12,000,000 × .11)] / [($7,000,000 + $12,000,000] = .090

The Wintergreen Organization,whose Tax Rate Is 30%,generates Two Sources of Funds