Wright Express (WE) Has a Capital Structure of 30% Debt

question 4

Multiple Choice

Wright Express (WE) has a capital structure of 30% debt and 70% equity. WE is considering a project that requires an investment of $2.6 million. To finance this project, WE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net WE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for WE? Assume WE has a beta of 1.20 and a marginal tax rate of 40%.

• A) 14.9%
• B) 12.4%
• C) 13.4%
• D) 16.0%

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Definitions:

School Involvement

The participation and engagement of stakeholders, including students, parents, teachers, and community members, in the educational process and school activities.

Economics

The social science that studies the production, distribution, and consumption of goods and services, focusing on how individuals, businesses, governments, and nations make choices about allocating resources.

Politics

The activities, actions, and policies used to gain and hold power in a government or to influence governance.

Conventional Family Engagement

Traditional forms of involving families in the educational and developmental processes of their children, often through schools and community settings.