Thompson & Jones has earnings before interest and taxes of $149,000. Both the book and the market value of debt is $265,000. The unlevered cost of equity is 13.5% while the pre-tax cost of
Debt is 9%. The tax rate is 34%. What is Thompson & Jones' weighted average cost of capital?
A) 10.94%
B) 11.65%
C) 11.72%
D) 12.01%
E) 12.37%

Question

Quizplus · Accepted Answer

The Answer of Thompson & Jones has earnings before interest and taxes of $149,000. Both the book and the market value of debt is $265,000. The unlevered cost of equity is 13.5% while the pre-tax cost of
Debt is 9%. The tax rate is 34%. What is Thompson & Jones' weighted average cost of capital?
A) 10.94%
B) 11.65%
C) 11.72%
D) 12.01%
E) 12.37%

Thompson & Jones Has Earnings Before Interest and Taxes of $149,000