The Following Information Comes from the Galaxy Construction Balance Sheet

question 64

Multiple Choice

The following information comes from the Galaxy Construction balance sheet.The value of common stock is $10,000,retained earnings equals $7,000,total common equity equals $17,000,preferred stock has a value of $3,000,and long-term debt totals $15,000.If the cost of debt is 8.00%,preferred stock has a cost of 10.00%,common stock has a cost of 12.00%,and the firm has a corporate tax rate of 30%,calculate the firm's WACC adjusted for taxes.

• A)10.11%
• B)10.00%
• C)9.09%
• D)There is not enough information to answer this question.

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Definitions:

Financial Audit Committee

A subgroup of a company’s board of directors focused on overseeing the financial reporting and disclosure process.

CFO

Chief Financial Officer, an executive responsible for managing the financial actions of a company, including financial planning, risk management, and record-keeping.

CEO

The Chief Executive Officer, the highest-ranking officer in an organization, responsible for major corporate decisions and management leadership.

Ethical Disaster

An occurrence resulting from actions that severely contradict ethical norms, leading to widespread moral or ethical condemnation.