Pacifica Inc. is an import-export company specializing in products from Canada, Australia, and the West Coast. It can borrow in the debt market at 6%. Its cost of equity with 30% D/V ratio is 11%. Its corporate tax rate is 25%
If the M&M world of taxes holds true, what is the WACC for the firm with a 30% D/V financing?
A) 7.90%
B) 8.75%
C) 9.05%
D) 9.44%
Answer: C
Explanation: C) WACC = × Re + × Rd × (1 - Tc) = .70 × 11% + .30 × 6% × (1 - 0.25) = 7.70% + 1.35% = 9.05%.
You might also like to view...
In a shipment contract, when is the title to the goods considered to have passed to the buyer?
A) when the seller makes the offer to the buyer B) when the seller hands over the goods to the common carrier C) when the seller tenders delivery of the goods at the specified destination D) when the goods are at the time and place of the shipment
Public warehouses do not furnish security for products being used as collateral for loans.
Answer the following statement true (T) or false (F)
Family partnerships are generally created when the owner of a business makes a gift of an equity interest in the business to a relative.
Answer the following statement true (T) or false (F)
Match the definition with its term.
A. A loan program that helps small companies obtain financing through a guaranty provided by the SBA B. An SBA program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child-care centers C. An SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment D. A lender that uses frunds from federal, state, and private sources to priovide financing to small businesses in low-income communities E. Individuals who form limited partnerships for the purpose of raising venture capital from large institutional investors F. Funds provided by wealthy private individuals to high-risk ventures G. H. An SBA program that helps to finance companies that plan to transform laboratory research into marketable products I. Privately owned banks, regulated by the SBA, that provide long-term loans and/or equity capital to small businesses