The Capital Structure for the CR Corporation Includes Bonds Valued

question 97

Multiple Choice

The capital structure for the CR Corporation includes bonds valued at $5,500 and common stock valued at $11,000.If CR has an after-tax cost of debt of 6%,and a cost of common stock of 16%,what is its WACC?

• A) 9.33%
• B) 12.67%
• C) 13.33%
• D) 14.67%

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Definitions:

Financial Lease

A lease agreement where the lessee assumes most of the risks and rewards of ownership, often with an option to purchase the asset at the end of the lease term.

Operating Lease

A lease agreement allowing a company to use an asset without owning it, typically with shorter terms than a finance lease.

Financial Lease

A type of lease in which the lessee has use of the asset for a significant portion of its useful life, and the lease payments are designed to cover the lessor's initial costs.

Debt-Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.