Assume JUP Has Debt with a Book Value of $20

question 31

Multiple Choice

Assume JUP has debt with a book value of $20 million,trading at 120% of par value.The firm has book equity of $20 million,and 2 million shares trading at $18 per share.What weights should JUP use in calculating its WACC?

• A)40% for debt,60% for equity
• B)50% for debt,50% for equity
• C)36% for debt,64%% for equity
• D)45% for debt,55% for equity
• E)30% for debt,70% for equity

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Definitions:

Sedimentary Layers

Strata of rock formed from sediment deposition, often distinguishable by differences in color, composition, or texture.

Boundary

A line or natural limitation that defines the extent of an area or the division between two areas, regions, or pieces.

Sand Dunes

Hills or ridges of sand piled up by the wind in desert environments or near beaches.

Meandering River

A river that has a strongly curved channel (with meanders).