A firm requires an investment of $30,000 and borrows $20,000 at 9%. If the return on equity is 15% and the tax rate is 30%, what is the firm's WACC?
A) 9.20%
B) 7.36%
C) 11.04%
D) 18.40%

Question

Quizplus · Accepted Answer

A) Use the WACC equation presented in this chapter. r_wacc = r_E 11ea84dc_f50f_3f56_9a63_37256c8d8be6_TB1316_11_TB1316_11 + r_D (1 - T_C) 11ea84dc_f50f_3f57_9a63_d5495ce56d6c_TB1316_11_TB1316_11 r_wacc = 15% × ($10,000 / $30,000) + 9% × (1 - 0.3) × ($20,000 / $30,000) = 9.20%

A Firm Requires an Investment of $30,000 and Borrows $20,000