A firm requires an investment of $36,000 and borrows $12,000 at 9%. If the return on equity is 20%, what is the firm's pretax WACC?
A) 8.2%
B) 19.6%
C) 16.3%
D) 22.9%

Question

Quizplus · Accepted Answer

C) Pretax WACC = r_E 11ea84dc_f507_ec3b_9a63_f509747a75ba_TB1316_11_TB1316_11 + r_D 11ea84dc_f507_ec3c_9a63_a7d1ad4e7c78_TB1316_11_TB1316_11 Pretax WACC = 20% × [$24,000 / ($24,000 + $12,000)] + 9% ×[$12,000 / ($24,000 + $12,000)] = 16.3%

A Firm Requires an Investment of $36,000 and Borrows $12,000