Examlex

Solved

Blammo,Inc

question 33

Multiple Choice

Blammo,Inc.has a target capital structure of 30% debt and 70% equity.The firm is planning to invest in a project that will necessitate raising new capital.New debt will be issued at a before-tax yield of 14%,with a coupon rate of 10%.The equity will be provided by internally generated funds so no new outside equity will be issued.If the required rate of return on the firm's stock is 22% and its marginal tax rate is 35%,compute the firm's cost of capital.


Definitions:

Individual Transferable Quotas (ITQs)

Limits (quotas) set by a government or a fisheries commission on the total number or total weight of a species that an individual fisher can harvest during some particular time period; fishers can sell (transfer) the right to use all or part of their respective individual quotas to other fishers.

TAC

Total Average Cost, the sum of all production costs divided by the number of goods produced, indicating the average cost per unit of product.

Arms Race

A competition between two or more parties to have the best armed forces and military technology, often leading to increased military spending and stockpiling of weapons.

Property Rights

Legal rights to possess, use, and dispose of assets including real property (land and buildings) and intellectual property.

Related Questions