You Were Hired as a Consultant to Quigley Company, Whose

question 48

Multiple Choice

You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from retained earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Quigley's WACC?

• A) 8.15%
• B) 8.48%
• C) 8.82%
• D) 9.17%
• E) 9.54%

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Definitions:

Overhead Costs

Expenses related to the day-to-day running of a business that cannot be directly linked to a specific product or service.

Time Charge

A billing method where a service provider charges a client based on the amount of time spent on a particular task or project.

Time And Material Pricing

A pricing method where a project is billed based on the actual time spent and the materials used.

Body Shop

Typically refers to a repair shop specializing in the repair and finishing of automobile bodies.