Suppose That PAW, Inc

question 22

Multiple Choice

Suppose that PAW, Inc. has a capital structure of 60 percent equity, 10 percent preferred stock, and 30 percent debt. If the before-tax component costs of equity, preferred stock and debt are 17.5 percent, 12 percent and 6.5 percent, respectively, what is PAW's WACC if the firm faces an average tax rate of 21 percent?

• A) 10.71 percent
• B) 4.00 percent
• C) 13.24 percent
• D) 13.10 percent

---

Definitions:

Cascading

The process of connecting or layering several components or systems in a step-wise fashion where the output of one serves as the input for the next.

Reciprocating Functions

Functions or operations that involve back-and-forth or repetitive motion, often seen in mechanical systems.

Parallel Circuit

A circuit in which two or more of the connected components or contact symbols in a ladder program are connected to the same pair of terminals so that current may flow through all the branches; contrasted with a series connection, in which the parts are connected end to end so that current flow has only one path.