Rollins Corporation Is Constructing Its MCC Schedule

question 57

Multiple Choice

Rollins Corporation is constructing its MCC schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm's marginal tax rate is 40 percent. Which of the following is Rollins' component cost of debt? (Round off the answer to one decimal place.)

• A) 8.4 percent
• B) 7.2 percent
• C) 6.8 percent
• D) 5.3 percent
• E) 9.5 percent

---

Definitions:

Solution Evaluation

The process of assessing the options available to solve a problem, involving comparison based on criteria such as effectiveness, feasibility, and cost.

Information Search

The process of seeking, acquiring, and evaluating data and information to make a decision or solve a problem.

Groupthink

A mental phenomenon in which the pursuit of agreement and uniformity within a group results in illogical or maladaptive decisions.

Prevented

Stopped from happening or existing through direct action or intervention.