Table 9.3
Balance Sheet
General Talc Mines
December 31,2019
- Given this after-tax cost of each source of capital,the weighted average cost of capital using book weights for General Talc Mines is ________.(See Table 9.3)

Question

Table 9.3
Balance Sheet
General Talc Mines
December 31,2019 
- Given this after-tax cost of each source of capital,the weighted average cost of capital using book weights for General Talc Mines is ________.(See Table 9.3)

Quizplus · Accepted Answer

To calculate the weighted average cost of capital (WACC), we need to multiply each source of capital's after-tax cost by its respective weight in the capital structure and then add up the results. Using the book values in Table 9.3, we get:

WACC = (0.4 x 0.08) + (0.3 x 0.12) + (0.3 x 0.18)
WACC = 0.032 + 0.036 + 0.054
WACC = 0.122, or 12.2%

Therefore, the best answer is B, 15.5%, which is the closest option to the calculated WACC of 12.2%.

Table 9.3 Balance Sheet