Use the Information for the Question(s)below

question 99

Multiple Choice

Use the information for the question(s) below.
Rockwood Enterprises is currently an all-equity firm and has just announced plans to expand their current business.In order to fund this expansion,Rockwood will need to raise $100 million in new capital.After the expansion,Rockwood is expected to produce earnings before interest and taxes of $50 million per year in perpetuity.Rockwood has already announced the planned expansion,but has not yet determined how best to fund the expansion.Rockwood currently has 16 million shares outstanding and following the expansion announcement these shares are trading at $25 per share.Rockwood has the ability to borrow at a rate of 5% or to issue new equity at $25 per share.
-If Rockwood finances their expansion by issuing $100 million in debt at 5%,what will Rockwood's cost of equity capital be?

• A)11.25%
• B)10.70%
• C)12.50%
• D)12.00%

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The visual output generated by a computer's video card or onboard video chipset, displayed on a monitor or display screen.

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An electronic circuit card that inserts into an expansion slot. Also called a controller, card, controller card, circuit card, circuit board, and adapter board.

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A point-to-point serial bus used for motherboard adapters. Each bit can travel over a lane, and each lane allows transfers up to 250 MB/s, with a maximum of 32 lanes (which gives a total of an 8 GB/s transfer rate).

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