Alpha Products Maintains a Capital Structure of 40% Debt and 60

question 5

Multiple Choice

Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to $1.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year?

• A) 9.64%
• B) 8.63%
• C) 9.84%
• D) 11.67%

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Definitions:

Conversion Rate

The percentage of visitors to a website or viewers of a marketing message who take a desired action, such as making a purchase.

Abandoned Shopping Carts

Occurs when online shoppers add items to their online shopping cart but exit without completing the purchase.

Humorous E-mail

An email sent with the intent to entertain the recipient, often used in marketing to engage customers in a light-hearted way.

Functional Risk

The possibility that a product or service will not perform as expected, leading to dissatisfaction or financial loss for the consumer.