Peter's Audio Shop Has a Cost of Debt of 7

question 15

Multiple Choice

Peter's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of preference shares of 8%.The firm has 104,000 shares of ordinary equity outstanding at a market price of £20 a share.
There are 40,000 preference shares outstanding at a market price of £34 a share.The bond issue
Has a total face value of £500,000 and sells at 102% of face value.The tax rate is 34%.What is the
Weighted average cost of capital for Peter's Audio Shop?

• A)6.14%
• B)6.54%
• C)8.60%
• D)9.14%
• E)9.45%

---

Definitions:

Seasonal Variation

Refers to periodic fluctuations in data or variables that occur at or depend on specific times of the year.

Moving Average Method

A statistical technique used to analyze time series data by calculating averages of different subsets of the complete dataset.

9-year Moving Averages

A method of smoothing data by calculating the average of different subsets of the total data period of nine years each.

Seasonal Variation

Regular fluctuations in a time series variable within a year, often related to the seasons.