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%

---

Definitions:

Electric Current

The flow of electric charge through a conductor, typically measured in amperes.

Antidepressant Drugs

Medications used to treat depression by influencing neurotransmitter levels in the brain.

Aerobic Exercise

Physical activity that improves the efficiency of the cardiovascular system in absorbing and transporting oxygen.

Nutritional Supplements

Products intended to add nutritional value to the diet, such as vitamins, minerals, and amino acids.