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The Gnome Company Has Provided the Following Information What Was Gnome's Weighted Average Cost of Capital?
A) 8

Question 54

Multiple Choice

The Gnome Company has provided the following information:
 Income tax rate 30% Target rate of return 12% Total assets $300,000 Total liabilities $150,000 Current liabilities $50,000 Operating income $40,000 Economic value added $3,000\begin{array} { | l | l | } \hline \text { Income tax rate } & 30 \% \\\hline \text { Target rate of return } & 12 \% \\\hline \text { Total assets } & \$ 300,000 \\\hline \text { Total liabilities } & \$ 150,000 \\\hline \text { Current liabilities } & \$ 50,000 \\\hline \text { Operating income } & \$ 40,000 \\\hline \text { Economic value added } & \$ 3,000 \\\hline\end{array} What was Gnome's weighted average cost of capital?


A) 8%
B) 10%
C) 14%
D) 12%

Correct Answer:

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