Given the Following Information for Groto Corp

question 295

Multiple Choice

Given the following information for Groto Corp. find the WACC. Assume the company's tax rate is 30%. Bonds: 10,000 9% coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 98% of par; the bonds make semi-annual payments. Common shares: 300,000 shares outstanding, selling for $40 per share; the beta is 0.95. Preferred shares: 55,000 shares of 6% preferred stock outstanding, currently selling for $100 per share. 10% market risk premium and 3% risk-free rate.

• A) 13.32%
• B) 12.32%
• C) 11.22%
• D) 10.12%
• E) 9.02%

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Definitions:

Collective Bargaining

Negotiation of employment conditions between employers and a group of employees who are usually represented by a union.

Conditions of Employment

The terms, policies, and requirements that define the working relationship between an employer and employee.

National Labor Relations Board

A federal agency in the United States responsible for enforcing US labor law in relation to collective bargaining and unfair labor practices.

Jurisdiction

The power of a court to hear cases and resolve disputes.