Wellington Gas Has a Target Capital Structure of 50 Percent

question 54

Multiple Choice

Wellington Gas has a target capital structure of 50 percent common equity, 40 percent debt, and 10 percent preferred stock.The cost of retained earnings is 16 percent, and the cost of new equity (external) is 16.7 percent.Wellington can sell debentures that will have an after-tax cost of 8.3 percent and the after-tax cost of preferred stock will be 11.9 percent.What is the marginal cost of capital before and after the break point?

• A)12.51% and 12.86%
• B)11.18% and 11.53%
• C)14.23% and 14.68%
• D)12.51% and 11.53%

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Definitions:

Hallucinations

Perceptions in the absence of external stimuli that are experienced as real, such as seeing, hearing, or feeling something that isn't there.

Negative Symptoms

Features that are diminished or absent in certain conditions, often referring to the lack of typical function seen in psychiatric disorders.

Schizophrenia

A chronic and severe mental disorder characterized by distortions in thinking, perception, emotions, language, sense of self, and behavior.

Blunted Affect

A reduction in the intensity of an individual's emotional response, often seen in psychiatric disorders.