Kernel Industries has two sources of funds: long-term debt with a market and book value...
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Kernel Industries has two sources of funds: long-term debt with a market and book value of $5 million issued at an interest rate of 12%, and equity capital that has a market value of $4 million (book value of $2 million). Kernel Industries has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 25%.
operating income Assets Current liability
St. Augustine $480,000 $2,000000 $100,000
Austin $600,000 $4,000000 $300,000
New Orleans $1,020,000 $6,000000 $600,000
What is the Weighted Average Cost of Capital (WACC) for Kernel Industries?
A .0480
B .0900
C .1033
D .1200
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