James Bay Water Park Operates in a World with Zero

question 57

Multiple Choice

James Bay Water Park operates in a world with zero taxes and no financial distress.The firm has a debt/equity ratio of 1.The cost of equity is 15% and the cost of debt is 8%.The only difference between Whispering Pines Resort and James Bay Water Park is that Whispering Pines Resort has a debt/equity ratio of 2.According to M&M, the weighted average cost of capital for Whispering Pines Resort will be:

• A)greater than the weighted average cost of capital for James Bay Water Park.
• B)the same as the weighted average cost of capital for James Bay Water Park.
• C)less than the weighted average cost of capital for James Bay Water Park.
• D)insufficient information is provided to answer the question.

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Definitions:

Evaluators

Individuals or entities that assess or judge the quality, value, or performance of products, services, or processes.

Buying Center

A group within an organization that collectively makes decisions on the procurement of goods and services.

Purchasing Manager

An individual responsible for buying goods and services for a company, ensuring the best quality for the lowest price.

HP

Hewlett-Packard, a multinational information technology company known for its wide range of hardware components as well as software and related services.