Gator Fabrics Inc A) 274%
B) 3

question 36

Multiple Choice

Gator Fabrics Inc. currently has zero debt . It is a zero growth company, and additional firm data are shown below. Now the company is considering using some debt, moving to the new capital structure indicated below. The money raised would be used to repurchase stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, by how much would the WACC change, i.e., what is WACCOld ? WACCNew? $$\begin{array} { l c l r } \mathrm { w} _ { \mathrm { d } } & 55 \% & \text { Orig. cost of equity, } \mathrm { r } _ { \mathrm { S } } & 10.0 \% \\\mathrm { w } _ { \mathrm { C } } & 45 \% & \text { New cost of equity } = \mathrm { r } _ { \mathrm { S } } & 11.0 \% \\\text { Interest rate new } = \mathrm { r } _ { \mathrm { d } } & 7.0 \% & \text { Tax rate } & 40 \%\end{array}$$

Distinguish between short and long reports.

Identify various forms of written reports.

Understand the components of long, formal reports.

Comprehend the use and importance of a structural coherence plan in reports.

---

Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.