1. Manteca Co. issues only common stock and coupon bonds. The firm has a debt-equity ratio of 1/3. The cost of equity is 13.7 percent and the pre-tax cost of debt is 9.4 percent. The tax rate is 35 percent. What is its weighted average cost of capital (WACC)?
12.82 percent
11.80 percent
9.87 percent
10.66 percent
2. The cost of capital is:
the return on the overall market.
another term for the market risk premium.
the minimum required return on a new investment.
another term for the risk-free rate of return.