Gator Fabrics Inc

question 14

Multiple Choice

Gator Fabrics Inc. currently has zero debt. It is a zero growth company, and it has the data shown below. Now the company is considering using some debt, moving to the new debt/assets ratio indicated below. The money raised would be used to repurchase stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, by how much would the WACC change, i.e., what is WACCOld - WACCNew? New Debt/Assets 55% Orig. cost of equity, rs 10.0%
New Equity/Assets 45% New cost of equity = rs 11.0%
Interest rate new = rd 7.0% Tax rate 40%

• A) 2.74%
• B) 3.01%
• C) 3.32%
• D) 3.65%
• E) 4.01%

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Hemolytic Uremic Syndrome

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Escherichia Coli

A common bacterium found in the intestines of animals and humans, some strains of which can cause food poisoning.

Animal Protein

Proteins derived from animal sources, such as meat, dairy, and eggs, known for being complete proteins containing all essential amino acids.

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