The Wrangler Co

question 327

Multiple Choice

The Wrangler Co. has expected EBIT = $9,250, and debt with a face and market value of $14,000 paying a 9% annual coupon. The market value of the firm is $58,525. If the tax rate is 34%, what is
Wranger's unlevered cost of capital?

• A) 9.00%
• B) 11.35%
• C) 12.12%
• D) 12.76%
• E) 12.99%

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Definitions:

Mid-Ocean Ridge

An underwater mountain range formed by plate tectonics, where new oceanic crust is created.

Transform Fault

A strike-slip fault that accommodates the horizontal movement of one tectonic plate past another.

Mid-Atlantic Ridge

An underwater ridge located in the Atlantic Ocean, forming a divergent tectonic plate boundary that separates the Eurasian and North American plates in the north and the African and South American plates in the south.

Seafloor Spreading

A geologic process in which tectonic plates move apart from each other, allowing magma to rise and solidify as new oceanic crust.