Use the Information for the Question(s)below

question 86

Multiple Choice

Use the information for the question(s) below.
Iota Industries Market Value Balance Sheet ($ Millions) and Cost of Capital Iota Industries New Project Free Cash Flows (Millions) Assume that this new project is of average risk for Iota and that the firm wants to hold constant its debt to equity ratio.
-Iota's weighted average cost of capital is closest to:

• A)8.40%.
• B)9.75%.
• C)10.85%.
• D)11.70%.

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Definitions:

Coin Toss

A coin toss is a basic experiment in probability theory used to demonstrate randomness, with two possible outcomes: heads or tails.

Poisson Distribution

A probability distribution that measures the likelihood of a given number of events happening in a fixed interval of time or space.

Probability Distribution

A mathematical function that gives the likelihoods of various possible results in an experiment.

Binomial Distribution

A probability distribution that describes the number of successes in a fixed number of independent trials, with each trial having only two possible outcomes.