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NEW QUESTION: 1

A. Option C
B. Option D
C. Option B
D. Option A
Answer: B

NEW QUESTION: 2
Consider the following information:
Borrowing Rate 10%
Marginal Tax Rate 40%
Preferred Stock Par Price $100
Preferred Dividend $10
Preferred Stock floatation cost 2.5%
Cost of common equity 12.0%
Preferred Stock issued at Par
The Optimal Capital Structure is 40% debt, 50% common equity, and 10% preferred stock. Credit Rating BB+ What is the firm's Weighted Average Cost of Capital (WACC)?
A. 12.62%
B. 7.42%
C. 9.0%
D. 2.5%
E. 8.0%
F. 9.42%
Answer: F
Explanation:
Explanation/Reference:
Explanation:
The firm's Weighted Average Cost of Capital (WACC) is a weighted average of the component cost of capital. In this case 10%(borrowing rate) x (1-.4)Tax savings = 6% is the component cost of debt. $10 (preferred dividend) / 97.5(Par minus floatation cost) = 10.25% is the component cost of preferred stock.
Thus the WACC = .4(6%) + .5(12%) + .1(10.25%) = 9.42%

NEW QUESTION: 3
Which two actions can be taken against each artifact under review? (Choose two.)
A. pass
B. approve
C. disapprove
D. reject
Answer: B,C