The Five and Dime Store has a cost of equity of 14.8 percent, a pretax cost of debt of 6.7 percent, and a tax rate of 34 percent.What is the firm's weighted average cost of capital if the debt-equity ratio is .46?

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The correct answer is C.The weighted average cost of capital (WACC) is calculated as follows:WACC = (E/V) * Re + (D/V) * Rd * (1 - T)where:E = market value of equityV = total value of the firmRe = cost of equityD = market value of debtRd = cost of debtT = tax rateIn this case, the debt-equity ratio is 0.46, which means that the market value of debt is 0.46 * V and the market value of equity is 0.54 * V. The cost of equity is 14.8 percent, the pretax cost of debt is 6.7 percent, and the tax rate is 34 percent. Therefore, the WACC is:WACC = (0.54 * V) * 0.148 + (0.46 * V) * 0.067 * (1 - 0.34)WACC = 0.0804 + 0.0294WACC = 0.1153 or 11.53 percent

The Five and Dime Store Has a Cost of Equity