LipTea Incorporated Purchases Raw Materials and Has Processing Plants Around

Multiple Choice

LipTea Incorporated purchases raw materials and has processing plants around the world. The firm finances 30% of its assets with debt and 70% with equity, has a 30% average tax rate, and can issue bonds at a pre-tax rate of 7%. Their standard deviation of returns is roughly 1.50 times as great as the market's returns, and has a correlation with the market of 0.45. If the risk-free rate of return is 5% and the expected return on the international market portfolio is 14%, what is the firm's WACC?

A) 7.75%
B) 8.38%
C) 12.24%
D) There is not enough information to answer this question.