Calculate the Weighted Average Cost of Capital for Limp Linguini

question 92

Multiple Choice

Calculate the weighted average cost of capital for Limp Linguini Noodle Makers Inc. under the following conditions:
*The capital structure is 40% debt and 60% equity.
*The before-tax cost of debt (which includes flotation costs) is 20% and the firm is in the 40% tax bracket.
*The firm's beta is 1.7.
*The risk-free rate is 7% and the market risk premium is 6%.

• A) 15.12%
• B) 18.7%
• C) 17.2%
• D) 12%

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Definitions:

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A fixed, over generalized belief about a particular group or class of people.

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The psychological discomfort experienced when holding conflicting beliefs, values, or attitudes, often leading to changes in beliefs or behaviors to reduce the dissonance.

ELM

The Elaboration Likelihood Model, a theory in social psychology explaining how people are persuaded, emphasizing the importance of the message's elaboration.