Wilson's Has 10,000 Shares of Common Stock Outstanding at a Market

question 47

Multiple Choice

Wilson's has 10,000 shares of common stock outstanding at a market price of $35 a share.The firm also has a bond issue outstanding with a total face value of $250,000 which is selling for 102 percent of face value.The cost of equity is 11 percent while the pre-tax cost of debt is 8 percent.The firm has a beta of 1.1 and a tax rate of 34 percent.What is Wilson's weighted average cost of capital?

• A) 8.59 percent
• B) 8.72 percent
• C) 9.08 percent
• D) 9.63 percent
• E) 10.05 percent

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing stocks, paying dividends, and borrowing loans.

Statement Of Cash Flows

A financial report that details the inflows and outflows of cash within a company over a specific period, indicating its operational, investing, and financing activities.