The Following Data Pertains to Zonk Corp -
Determine the Weight on Debt Capital That Should

question 20

Multiple Choice

The following data pertains to Zonk Corp., a manufacturer of ball bearings (dollar amounts in millions) :
$\begin{array}{llcc} \text { Total assets } &\$6,840 \\ \text { Interest-beaning debt } &\$3,562\\ \text { Average pre-tax borrowing cost} &11.59\%\\ \text {Common equity: } &\\ \text { Book value } &\$2,560\\ \text { Market value } &\$12,850\\\text { Income tax rate } &35\%\\ \text {Market equity beta } &1.24\\\end{array}$

-
Determine the weight on debt capital that should be used to calculate Zonk's weighted-average cost of capital:

• A) 21.7%
• B) 78.3%
• C) 50%
• D) 58.2%

---

Definitions:

Organizational Effectiveness

The degree to which an organization achieves its goals through efficient use of resources.

OD Strategy

Organizational Development Strategy, a comprehensive plan aimed at improving effectiveness, health, and outcomes of an institution through planned change processes.

Quality Guru

An expert or thought leader in the field of quality management and improvement practices.

Humanistic And Democratic

A leadership or organizational approach emphasizing individual potential, freedom, and participative decision-making.