Assume That You Are an Intern with the Brayton Company

question 38

Multiple Choice

Assume that you are an intern with the Brayton Company, and you have collected the following data: The yield on the company's outstanding bonds is 7.75%; its tax rate is 25%; the next expected dividend is $0.65 a share; the dividend is expected to grow at a constant rate of 6.00% a year; the price of the stock is $15.00 per share; the flotation cost for selling new shares is F = 10%; and the target capital structure is 45% debt and 55% common equity.What is the firm's WACC, assuming it must issue new stock to finance its capital budget?

• A) 7.34%
• B) 7.73%
• C) 8.14%
• D) 8.56%
• E) 8.99%

---

Definitions:

Verbal Behavior

The aspect of human behavior that involves the expression of thoughts, feelings, and intentions through spoken or written language.

Social Scripts

Predetermined, stereotyped sequences of actions that help individuals know what to expect in social situations.

Scapegoating

The practice of unfairly blaming someone or a group for problems, often to deflect attention or responsibility away from oneself.

Prejudice

A preconceived opinion or judgment towards an individual or group without sufficient knowledge, often based on stereotypes.