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PAW Industries Has 5 Million Shares of Common Stock Outstanding

question 4

Multiple Choice

PAW Industries has 5 million shares of common stock outstanding with a market price of $8.00 per share. The company also has outstanding preferred stock with a market value of $10 million, and 100,000 bonds outstanding, each with face value $1,000 and selling at 96% of par value. The cost of equity is 19%, the cost of preferred is 15%, and the cost of debt is 9%. If PAW's tax rate is 34%, what is the WACC?

Comprehend the unique accounting treatments for natural resources and intangible assets, including depreciation, amortization, and depletion.

Understand the criteria and process for recognizing and measuring the impairment of assets.

Grasp the principles of accounting for lump-sum purchases and the allocation of cost among acquired assets.

Understand the concepts of residual value, useful life, and depreciation methods, and their impact on financial reporting.

Definitions:

Automobile Finance Company

A financial institution that provides loans to individuals or businesses specifically for the purpose of purchasing automobiles.

Market Signals

Indicators or signs that guide economic actors to make decisions based on current market conditions.

Moral Hazard

A situation where one party is more likely to take risks because they do not bear the full consequences of those risks.

Warranties

Guarantees issued by a manufacturer or seller to a buyer, promising to repair or replace a product if it fails within a certain period of time.