LipTea Incorporated Purchases Raw Materials and Has Processing Plants Around

question 1

Multiple Choice

LipTea Incorporated purchases raw materials and has processing plants around the world. The firm finances 30% of its assets with debt and 70% with equity, has a 30% average tax rate, and can issue bonds at a pre-tax rate of 7%. Their standard deviation of returns is roughly 1.50 times as great as the market's returns, and has a correlation with the market of 0.45. If the risk-free rate of return is 5% and the expected return on the international market portfolio is 14%, what is the firm's WACC?

• A) 7.75%
• B) 8.38%
• C) 12.24%
• D) There is not enough information to answer this question.

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Definitions:

Hadrosaur

A type of duck-billed dinosaur that lived during the Late Cretaceous period, known for its flat beak and often elaborate head crests.

Crest

A prominent feature or projection on an animal's body, such as the plumage on the head of a bird or a ridge along a dinosaur's skull, often used for display or signaling.

Species Specific Sounds

Unique vocalizations or sound patterns that are characteristic of particular species, often used for communication.

Earliest Fossils

The oldest known remnants or impressions of ancient organisms preserved in rock.