Assume JBH Has Debt with a Book Value of $20

question 51

Multiple Choice

Assume JBH has debt with a book value of $20 million, trading at 120% of par value. The bonds have a yield to maturity of 6%. The firm has book equity of $20 million, and 2 million shares trading at $18 per share. The firm's cost of equity is 12%. What is JBH's WACC if the firm's marginal tax rate is 30%?

• A) 9.00%
• B) 8.88%
• C) 9.60%
• D) 6.24%

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product at which aggregate supply equals aggregate demand, leading to an economy operating at full capacity without inflationary pressures.

Full Employment GDP

The level of gross domestic product achieved when there is no cyclical unemployment in the economy, representing an ideal economic state where all willing and able workers find employment.

Economic Problem

When we have limited resources available to fulfill society’s relatively limitless wants.

Unemployment

The situation in which individuals who are capable of working and actively seeking employment are unable to find a job.