Malitz Inc

question 13

Multiple Choice

Malitz Inc.recently hired you as a consultant to estimate the company's WACC.You have obtained the following information.- Malitz's noncallable bonds mature in 25 years,have an 8.00% annual coupon,a par value of $1,000,and a market price of $1,075.00.- The company's tax rate is 40%.- The risk-free rate is 4.50%,the market risk premium is 5.50%,and the stock's beta is 1.20.- The target capital structure consists of 35% debt and the balance as common equity.Malitz uses the CAPM to estimate the cost of equity,and it does not expect to issue any new common stock.What is its WACC?

• A)7.51%
• B)7.90%
• C)8.32%
• D)8.76%

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Definitions:

Jaund

Likely an abbreviation or typo for "jaundice," which is a yellowing of the skin or whites of the eyes due to increased bilirubin levels.

Integumentary

Referring to the body system that encompasses the skin, hair, nails, and exocrine glands, serving as the body's first line of defense against external harm.

Integument

The natural covering of an organism or an organ, such as skin, shell, or membrane.

Telangiectasia

The expansion of small blood vessels near the surface of the skin or mucous membranes, causing visible red lines or patterns.