Use the Data Provided on Cadbury to Answer the Question

question 25

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.Cadbury's cost of debt (after-tax) is 2.7%.Cadbury's cost of equity is 8.65%.What is Cadbury's WACC?

• A) 6.37%
• B) 7.51%
• C) 7.76%
• D) 8.02%
• E) 8.16%

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Definitions:

Synapse

A junction between two nerve cells, consisting of a minute gap across which impulses pass by diffusion of a neurotransmitter.

Neurotransmitter

Chemical substances in the brain and body that transmit signals from one neuron to another, influencing various functions including mood, appetite, and sleep.

Experience-Expectant

Relates to brain development that unfolds as a result of general human experiences that can be expected to occur in any environment.

Brain Development

Brain Development refers to the process of growth and change in the brain's structure and function over the course of a person's life, especially significant during childhood and adolescence.