Your company is looking at a major acquisition and needs to raise $90,000,000. The firm currently has a 2:1 ratio of Equity to Debt and plans to maintain that ratio. The pre-tax costs of debt and equity are 8% and 15% respectively. The tax rate is 27%. Flotation costs are 3% for equity and 2% for debt. What is the WACC for the company’s $90,000,000 funding?

a. 5.96%

b. 10.71%

c. 11.50%

d. 12.29%

e. 15.46%

2. Suppose you pay $500 for an investment that returns $600 in one year. What is the annual rate of return?

Amount invested $500

Amount received $600

Dollar return

Rate of return