A Firm Has 5,000,000 Shares of Common Stock Outstanding, Each

question 74

Multiple Choice

A firm has 5,000,000 shares of common stock outstanding, each with a market price of $10.00 per share. It has 55,000 bonds outstanding, each selling for $990 with a $1000 face value. The bonds mature in 15 years, have a coupon rate of 8%, and pay coupons semi-annually. The firm's equity has a beta of 2.0, and the expected market return is 15%. The tax rate is 35% and the WACC is 16%. Calculate the risk-free rate.

• A) 27.68%
• B) 1.79%
• C) 2.32%
• D) 2.12%

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Definitions:

Self-Actualization Needs

The apex of Maslow's needs pyramid, which encompasses achieving one's ultimate potential, pursuing self-realization, aiming for personal development, and experiencing life's high points.

Social Responsibility

The obligation of an entity, individual or corporate, to act for the benefit of society at large, often incorporating ethical considerations and sustainability practices into business operations.

Behaviour Modification

The application of behavioral change techniques to alter individuals' activities and reactions.

Esteem Needs

According to Maslow's hierarchy of needs, these are the fourth level and include self-esteem, confidence, respect by others, and respect for others.