XYZ Industries Has 10 Million Shares of Stock Outstanding Selling

question 5

Multiple Choice

XYZ Industries has 10 million shares of stock outstanding selling at $10 per share and an issue of $30 million in 8.5 percent, annual coupon bonds with a maturity of 25 years, selling at 102 percent of par ($1000) . If XYZ's weighted average tax rate is 40 percent and its cost of equity is 15 percent, what is XYZ's WACC?

• A) 8.06%
• B) 11.75%
• C) 12.65%
• D) 13.43%

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Definitions:

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand, achieving a market balance.

Industry Entry

The process by which new competitors join an existing market, often leading to increased competition.

Profit Circumstances

Conditions or situations that influence the profitability of a business or investment.

Monopolistically Competitive

A market structure where many companies sell products that are similar but not identical, allowing for significant influence over pricing.