A Firm Has 4,000,000 Shares of Common Stock Outstanding, Each

question 123

Multiple Choice

A firm has 4,000,000 shares of common stock outstanding, each with a market price of $12.00 per share. It has 25,000 bonds outstanding, each selling for $980. The bonds mature in 20 years, have a coupon rate of 9%, and pay coupons semi-annually. The firm's equity has a beta of 1.5, and the expected market return is 15%. The tax rate is 30% and the WACC is 15%. What is the risk-free rate?

• A) 6.28%
• B) 8.00%
• C) 9.22%
• D) 19.36%

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Definitions:

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