Waec Model Questions Vol1 2025 Commerce Question 41

Practice objective / multiple choice question 41 from the 2025 Waec Model Questions Vol1 Commerce examination.

Waec Model Questions Vol1 2025 Commerce Objective / Multiple Choice Medium Difficulty
Question 41 WAEC_MODEL_QUESTIONS_VOL1 • 2025 • COMMERCE • objective

A firm needs ₦500,000 for expansion. It can raise finance from three sources: (i) retained earnings with a cost of 8% per annum, (ii) 10% debentures (cost after tax) and (iii) a bank loan at 12% per annum. The firm's policy is that external financing (debentures and bank loan) may not exceed 60% of the total funds required. Determine the optimal mix of the three sources that minimises the weighted average cost of finance and compute that minimum cost as a percentage per annum.

Answer Options

A. Retained earnings ₦250,000; debentures ₦250,000; weighted average cost 9.6% per annum
B. Retained earnings ₦200,000; debentures ₦200,000; weighted average cost 8.4% per annum
C. Retained earnings ₦300,000; debentures ₦200,000; weighted average cost 8.8% per annum
Correct Answer D. Retained earnings ₦200,000; debentures ₦300,000; weighted average cost 9.2% per annum
Correct Answer
D
Correct Option:
Retained earnings ₦200,000; debentures ₦300,000; weighted average cost 9.2% per annum

About This Question

This is Waec Model Questions Vol1 2025 Commerce Question 41. It is one of the objective questions from the 2025 Waec Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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