JLP Industries Has 6

question 90

Multiple Choice

JLP Industries has 6.5 million shares of common stock outstanding with a market price of $20.00 per share. The company also has outstanding preferred stock with a market value of $10 million, and 25,000 bonds outstanding, each with face value $1,000 and selling at 90 percent of par value. The cost of equity is 14 percent, the cost of preferred stock is 10 percent, and the yield of the debt is 6.25%. If JLP's tax rate is 34 percent, what is the WACC?

• A) 12.39 percent
• B) 12.98 percent
• C) 13.13 percent
• D) 13.72 percent

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Definitions:

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period, which is used to calculate the cost of goods sold.

Operating Expenses

The costs associated with running the day-to-day operations of a business, excluding the cost of goods sold.

Gross Profit

The difference between revenue and the cost of goods sold, indicating how efficiently a company produces goods or services.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the product.