Were Hired as a Consultant to Giambono Company, Whose Target

question 42

Multiple Choice

were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity.The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of common using retained earnings is 12.75%.The firm will not be issuing any new stock.What is its WACC?

• A)8.98%
• B)9.26%
• C)9.54%
• D)9.83%
• E)10.12%

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Definitions:

CPI

This index, known as the Consumer Price Index, evaluates the weighted average cost of a collection of goods and services bought by consumers, covering areas like food, medical care, and transportation.

Base Year

A specific year against which economic growth is measured, serving as a benchmark for relative economic data comparisons.

Business Cycle

The cyclical fluctuations in economic activity that an economy experiences over a period of time, including periods of expansion and contraction.

Last Recession

The most recent period of significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production.