Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 12%; cost of common equity = 25%; common equity = $700,000; interest-bearing debt = $300,000; and a tax rate = 25%

a. 15%
b. 16.4%
c. 20.2%
d. 22.8%
e. 30%

ANSWER:

c. 20.2%