Suppose That PAW, Inc

question 53

Multiple Choice

Suppose that PAW, Inc. has a capital structure of 60 percent equity, 10 percent preferred stock, and 30 percent debt. If the before-tax component costs of equity, preferred stock and debt are 17.5 percent, 12 percent and 6.5 percent, respectively, what is PAW's WACC if the firm faces an average tax rate of 28%?

• A) 10.71%
• B) 12.00%
• C) 13.10%
• D) 13.65%

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Definitions:

Test Market

A selected geographic region or demographic group used to gauge the viability of a product or marketing campaign before a full-scale launch.

Pricing Strategy

An approach used by companies to determine the best price point to maximize profit and market share.

Measure Of Success

A standard or set of criteria used to evaluate the effectiveness, achievement, or performance of a task or objective.