Company X Has 2 Million Shares of Common Stock Outstanding

question 56

Multiple Choice

Company X has 2 million shares of common stock outstanding at a book value of $2.00 per share.The stock trades for $3.00 per share.It also has $2 million in face value of debt that trades at 90% of par.What is its ratio of debt to value for WACC purposes?

• A) 13.9%
• B) 23.1%
• C) 31.0%
• D) 76.9%

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Definitions:

Biased Sample

A non-representative sample that does not accurately reflect the demographics or characteristics of the larger population.

Case Study

is a detailed examination of a particular case (such as a person, group, or event) over a period of time, often used in social, psychological, or educational research.

Representative Sample

A subset of a population that accurately reflects the members of the entire population.

Single-Blind Study

A study design where the participants do not know which group they belong to (control or experimental) to prevent bias, but the researchers do.