J Ross and Sons Inc

question 65

Multiple Choice

J. Ross and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The firm's current after tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. The firm's preferred stock currently sells for $90 per share and pays a dividend of $10 per share; however, the firm will net only $80 per share from the sale of new preferred stock. Ross's common stock currently sells for $40 per share. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year.
-What is the firm's weighted average cost of capital (WACC) ?

• A) 9.5%
• B) 10.3%
• C) 10.8%
• D) 11.4%
• E) 11.9%

Predict consumer behavior in response to changes in income, prices, or both.

Understand the basic properties of indifference curves and how they represent consumer preferences.

Comprehend the concept of budget constraints and how consumers allocate their income between different goods.

Analyze how changes in prices or income affect consumer choices and budget constraints.

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Definitions:

Corporation

A legal entity recognized by law as separate from its owners, with its own rights, privileges, and liabilities.

Ownership

The legal right or title to possess and use property, whether tangible or intangible.

Affiliated Directors

Members of a company's board of directors who have a close relationship to or are employed by the company, potentially influencing their decisions.

Outside Directors

Board members who are not executives or employees of the company, providing independent oversight.