Question 9 (0.2 points)

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Question 9 options:

Use below for Q9 and Q10. Kareem Construction Company has the following amounts of interest-bearing debt and common equity capital:

Financing Dollar Interest Cost of

Source Amount Rate Capital

Short-Term Loan $300,000 10%

Long-Term Loan $200,000 12%

Equity Capital $500,000 20%

Kareem Construction is in the 25 percent average tax bracket.

Calculate the after-tax (WACC) for Kareem. In percentage and round by two decimal places.

Question 10 (0.2 points)

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Question 10 options:

Show how Kareems WACC would change if the tax rate increases to 30 percent and the estimated cost of equity capital is based on a risk-free rate of 5 percent, a market risk premium of 12 percent, and a systematic risk measure or beta of 1.5. In percentage and round by two decimal places.