Given the Following Information, What Is WBM Corporation's WACC? Common

question 37

Multiple Choice

Given the following information, what is WBM Corporation's WACC? Common Stock: 1 million shares outstanding, $40 per share, $1 par value, beta = 1.3
Bonds: 10,000 bonds outstanding, $1,000 face value each, 8% annual coupon, 22 years to maturity,
Market price = $1,101.23 per bond
Market risk premium = 8. 6%, risk-free rate = 4. 5%, marginal tax rate = 34%

• A) 7.89%
• B) 9.90%
• C) 12.19%
• D) 13.30%
• E) 15.78%

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Definitions:

Utility Maximization

The process by which consumers adjust their consumption to achieve the highest level of satisfaction from their available resources.

Marginal Utility

The incremental pleasure or advantage obtained by consuming an extra unit of a good or service.

Price Ratio

The ratio or comparison between the prices of two different goods or services.

Diamond/Water Paradox

A paradox highlighting the contradiction between the high value of items with little utility (diamonds) and the low value of items with great utility (water), illustrating the difference between total and marginal utility.