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:

Synonym

A word that has the same or nearly the same meaning as another word.

Motherese

A form of speech used by adults, characterized by a higher pitch and slower tempo, to communicate more effectively with infants.

Prelinguistic Speech

Forerunner of linguistic speech; utterance of sounds that are not words. Includes crying, cooing, babbling, and accidental and deliberate imitation of sounds without understanding their meaning.

Gestures

Nonverbal movements or signs made with parts of the body, used to communicate ideas, emotions, or commands.