Thermacorp's weighted average cost of capital is 13.5. If the average WACC in the heating and cooling industry is 19, Thermacorp can be said to be earning
A) above normal economic performance.
B) above normal accounting performance.
C) below normal economic performance.
D) below normal accounting performance.

Question

Quizplus · Accepted Answer

Thermacorp's WACC of 13.5 is lower than the industry average WACC of 19. This suggests that Thermacorp has a lower cost of financing compared to its competitors. However, the question is asking whether Thermacorp is earning above or below normal economic performance. Given that its WACC is lower than the industry average, it can be argued that Thermacorp is not earning the same returns as its competitors in the heating and cooling industry. Thus, it can be said that Thermacorp is experiencing below normal economic performance.

Thermacorp's Weighted Average Cost of Capital Is 13