A company has a market value of $$500$ million. It has a market value of equity of $$200$ million, a market value of long$-$term debt of $$150$ million, and a market value of short$-$term debt of $$150$ million.

The cost of equfy is $12\%,$ the cost of long$-$term debt is $8\%,$ and the cost of short$-$term debt is $6\%.$ The marginal tax rate is $35\%.$

What is the wolghted average pre$-$tax cost of capital $($WACC$)$ for this company?

YOUR ANSWER

$7\mathrm{.}53\%$

$8\mathrm{.}16\%$

$8\mathrm{.}37\%$

$9\mathrm{.}00\%$

CORRECT

ANSWER

ANSWER

$8\mathrm{.}16\%$

$8\mathrm{.}37\%$

$9\mathrm{.}00\%$