A firm requires an investment of $60,000 and borrows $30,000 at 9%. If the return on equity is 22% and the tax rate is 35%, what is the firm's WACC?
A) 11.1%
B) 13.9%
C) 16.7%
D) 27.9%

Question

Quizplus · Accepted Answer

B) Use the WACC equation presented in this chapter. r_wacc = r_E 11ea84dc_f50f_8d78_9a63_31c9aa966c36_TB1316_11_TB1316_11 + r_D (1 - T_C) 11ea84dc_f50f_8d79_9a63_8543b80beb83_TB1316_11_TB1316_11 r_wacc = 22% × ($30,000 / $60,000) + 9% × (1 - 0.35) × ($30,000 / $60,000) = 13.9%

A Firm Requires an Investment of $60,000 and Borrows $30,000