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

question 87

Multiple Choice

A firm has 5,000,000 shares of common stock outstanding, each with a market price of $8.00 per share. It has 25,000 bonds outstanding, each selling for $1100 with a $1000 face value. The bonds mature in 12 years, have a coupon rate of 9%, and pay coupons semi-annually. The firm's equity has a beta of 1.4, and the expected market return is 15%. The tax rate is 35% and the WACC is 14%. Calculate the risk-free rate.

• A) 2.05%
• B) 15.27%
• C) 20.18%
• D) 1.19%

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Definitions:

Schizophrenia

A mental disorder characterized by distorted thinking, perceptions, emotions, language, sense of self, and behavior.

Psychotic Thought Processes

Refers to patterns of thinking that are severely disrupted, often characterized by delusions or hallucinations, and are typical in various psychotic disorders.

Psychological Disorder

A condition characterized by patterns of thought, feeling, or behavior that leads to distress, impaired functioning, or both.

Positive Symptoms

Symptoms that add abnormal behaviors or experiences, such as hallucinations or delusions, particularly in the context of conditions like schizophrenia.