You Are Given the Following Information Concerning Around Town Tours

question 39

Multiple Choice

You are given the following information concerning Around Town Tours:
Debt:
8,500,7.1 percent coupon bonds outstanding,with 14 years to maturity and a quoted price of 102.6.These bonds pay interest semiannually.
Common stock:
265,000 shares of common stock selling for $76 per share.The stock has a beta of 0.92 and will pay a dividend of $2.48 next year.The dividend is expected to grow by 4 percent per year indefinitely.
Preferred stock:
7,500 shares of 6 percent preferred stock selling at $88 per share.
Market:
A 13.2 percent expected return,a 4.5 percent risk-free rate,and a 34 percent tax rate.
Calculate the WACC for this firm.

• A)8.22 percent
• B)8.67 percent
• C)9.29 percent
• D)9.57 percent
• E)10.08 percent

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Definitions:

Cold Site

A backup location for an organization to relocate its operations in case of a major disruption, which is not immediately operational but can be equipped and made ready if necessary.

Locked Site

A secured website or online area that requires authentication, such as a username and password, to access.

Storage Facility

A place where items or materials can be stored for short or long-term, often including warehouses, lockers, or units.

Commercial Records Center

A facility that offers storage and management of business records, documents, and information.