Santa Claus Enterprises Has 87,000 Shares of Common Stock Outstanding

question 29

Multiple Choice

Santa Claus Enterprises has 87,000 shares of common stock outstanding at a current price of $39 a share.The firm also has two bond issues outstanding.The first bond issue has a total face value of $230,000, pays 7.1 percent interest annually, and currently sells for 103.1 percent of face value.The second bond issue consists of 5,000 bonds that are selling for $887 each.These bonds pay 6.5 percent interest annually and mature in eight years.The tax rate is 35 percent.What is the capital structure weight of the firm's debt?

• A)57.93 percent
• B)51.39 percent
• C)55.50 percent
• D)60.52 percent
• E)71.86 percent

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Definitions:

Reliability

The probability that a system, component, or device will perform its required function under stated conditions for a specific period of time.

Empowered Employees

Workers who are given the authority, capability, and encouragement to take meaningful actions in their roles.

Maintenance Strategy

A planned approach for conducting upkeep and repairs of equipment, infrastructure, or systems to ensure their optimal working condition and longevity.

Breakdown Maintenance

Reactive maintenance performed after a machine or system fails in order to restore it to operating condition.