To Estimate the Company's WACC,Marshall Inc

question 46

Multiple Choice

To estimate the company's WACC,Marshall Inc.recently hired you as a consultant.You have obtained the following information.(1) The firm's noncallable bonds mature in 20 years,have an 8.00% annual coupon,a par value of $1,000,and a market price of $1,050.00.(2) The company's tax rate is 40%.(3) The risk-free rate is 4.50%,the market risk premium is 5.50%,and the stock's beta is 1.20.(4) The target capital structure consists of 35% debt and the balance is common equity.The firm uses the CAPM to estimate the cost of common stock,and it does not expect to issue any new shares.What is its WACC?

• A) 7.16%
• B) 7.54%
• C) 7.93%
• D) 8.35%
• E) 8.79%

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