QUESTION 5

1. The market value of Charter Cruise Company's equity is $15 million and the market value of its debt is $5 million. If the required rate of return on the equity is 16 percent and that on its debt is 6 percent, calculate the company's WACC. (Assume a 40% tax rate.)

   a) 7.2 % b) 10.3%. c)11.4% d) 12.9%