McDuffs' Moving and Storage Has a Capital Structure Which Includes

question 14

Multiple Choice

McDuffs' Moving and Storage has a capital structure which includes 1.5 million common shares selling at $15.00 per share with a dividend of $1.70 and a growth in dividends of 1.1% per year. Its newly issued 300,000 preferred shares have an issue and market price of $50, a term of 5 years and a fixed dividend of $4.50. McDuffs' nominal $40 million debt is perpetual with a interest rate of 7% and selling at $92 per $100 of nominal value. The company's tax rate is 28%. Using trial values of 6% and 12%, what is the company's weighted average cost of capital?

• A) 7.8
• B) 8.3
• C) 8.4
• D) 9.0
• E) 9.3

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Definitions:

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