A firm requires an investment of $20,000,and will be financed with 50% equity and 50% debt.If the firm's debt cost of capital is 6%,and its return on equity is 15%,what is the firm's pre-tax WACC?

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The correct answer is A.The 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 = corporate tax rateIn this case, we have:E = $10,000V = $20,000Re = 15%D = $10,000Rd = 6%T = 0Therefore, the WACC is:WACC = (10,000/20,000) * 15% + (10,000/20,000) * 6% * (1 - 0)= 10.5%

A Firm Requires an Investment of $20,000,and Will Be Financed