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) :
$\begin{array}{llcc} \text { Total assets } &\$6,840 \\ \text { Interest-beaning debt } &\$3,562\\ \text { Average pre-tax borrowing cost} &11.59\%\\ \text {Common equity: } &\\ \text { Book value } &\$2,560\\ \text { Market value } &\$12,850\\\text { Income tax rate } &35\%\\ \text {Market equity beta } &1.24\\\end{array}$

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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%

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Definitions:

Skewed

Refers to a distribution that is not symmetrical, where one tail is longer or fatter than the other.

Pregnant Women

Females in the state of carrying a developing fetus within their womb.

Histogram

A graphical representation that organizes a group of data points into user-specified ranges, showing the frequency of data in each range.

Skewed

Describes a distribution that is not symmetrical, with a majority of values leaning towards one side.