Use the Data Provided on Cadbury to Answer the Question

question 40

Multiple Choice

Use the data provided on Cadbury to answer the question below.The risk free rate is 4.25%.The expected return on the market portfolio is 9.75%.The corporate tax rate is 40%.The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling.The coupon rate on Cadbury's bonds is 4.5%.Assume that the bonds pay annual coupons.The yield to maturity on Cadbury's bonds is 4.5%.Cadbury's bonds mature in 7 years.Cadbury has 1.650 billion common shares outstanding.The market price of Cadbury's common shares as of Dec 31,2008 is 6.25 pounds sterling.Cadbury's Beta is 0.8.What is Cadbury's cost of equity?

• A) 4.20%
• B) 4.40%
• C) 7.80%
• D) 8.65%
• E) 8.70%

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Pustule

Small elevation of the skin filled with lymph or pus.

Arthritis

Inflammation of a joint.

Integumentary

Pertains to the integument or skin, which is the body's largest organ, covering and protecting it.

Malignant Melanoma

This is a serious skin cancer originating from pigment-producing cells, known for its ability to rapidly spread to other organs if not treated early.