Spacetech Is an All Equity Company with Common and Preferred

question 234

Multiple Choice

Spacetech is an all equity company with common and preferred shares. There are 250,000 common shares outstanding. Currently the common shares have a price of $50 per share and have consistently provided a $2 per share dividend. There are 50,000 5% preferred shares outstanding, with a stock price of $90 per share. Given this information, calculated the company's WACC.

• A) 8.60%
• B) 7.59%
• C) 6.48%
• D) 5.37%
• E) 4.26%

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Definitions:

Lease Revenue Recognition

The process of recognizing income earned from leasing out assets over the lease term.

Lease Liability

An obligation representing the present value of lease payments due over the lease term by the lessee.

Executory Costs

Ongoing operational expenses related to a leased asset, typically including insurance, maintenance, and taxes, that are usually paid for by the lessee.

Salvage Value

Salvage value is the estimated resale value of an asset at the end of its useful life.