Use the information for the question(s)below.
Omicron Industries' Market Value Balance Sheet ($ Millions)
and Cost of Capital Omicron Industries New Project Free Cash Flows Assume that this new project is of average risk for Omicron and that the firm wants to hold constant its debt to equity ratio.
-Omicron's weighted average cost of capital is closest to:
A)7.10%
B)7.50%
C)9.60%
D)8.75%

Question

Use the information for the question(s)below.
Omicron Industries' Market Value Balance Sheet ($ Millions)
and Cost of Capital  Omicron Industries New Project Free Cash Flows  Assume that this new project is of average risk for Omicron and that the firm wants to hold constant its debt to equity ratio.
-Omicron's weighted average cost of capital is closest to:
A)7.10% 
B)7.50% 
C)9.60% 
D)8.75%

Quizplus · Accepted Answer

D)r_wacc = 11ea7cce_3c9a_172c_928c_ed8df19c680d_TB1626_11 r_E + 11ea7cce_3c9a_172d_928c_3d23c7209eb3_TB1626_11 r_D(1 - τ_c),where D = net debt = Debt - Cash r_wacc = 11ea7cce_3c9a_3e3e_928c_bb130981d52b_TB1626_11 (.12)+ 11ea7cce_3c9a_3e3f_928c_45b317cc76ac_TB1626_11 (.06)(1 - .35)= .0876

Use the Information for the Question(s)below