In Which of the Following Cases Would It Most Likely

question 272

Multiple Choice

In which of the following cases would it most likely be appropriate to use the WACC that relates to existing operations?

• A) A pizza delivery service is planning to expand by adding a sit-down pizza restaurant.
• B) A grocery store owner is considering adding a bakery and a delicatessen to his store.
• C) A gas tank manufacturer is contemplating switching to manufacturing tie-outs for dogs.
• D) A gas station owner is considering adding a convenience store.
• E) A manufacturer of garbage bags is considering expanding production capacity to meet increasing demand.

---

Definitions:

Percentage Increase

The proportion of growth from one period to another, typically expressed as a percentage.

Coupon

The annual interest rate paid on a bond, expressed as a percentage of the face value.

Bond Maturity

The date on which a bond’s principal amount becomes due and is repaid to investors and the bond issuer’s interest obligations cease.

Corporate Bonds

Debt securities issued by corporations to finance their operations and projects, typically offering a fixed rate of return.