Key Facts and Assumptions Concerning FM Foods, Inc

question 16

Multiple Choice

Key facts and assumptions concerning FM Foods, Inc. at December 31, 2011, appear below.

-Estimate the appropriate weight of debt to be used when calculating FM's weighted average cost of capital.

• A) 11.5%
• B) 19.3%
• C) 80.7%
• D) 88.5%
• E) 100.0%
• F) None of the above.

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Definitions:

Water Table

The level below the Earth's surface at which the ground is fully saturated with water.

Zone of Saturation

The area beneath the Earth's surface where all the pores and fractures of the rock are filled with water.

Permeability

A measure of how easily fluids can flow through a porous material, such as rocks or soil, due to the presence of interconnected void spaces.

Loosely Cemented Sand

Sand particles that are weakly bound together by a mineral matrix, which can easily erode or change shape under physical stress.