PAW Industries Has 5 Million Shares of Common Stock Outstanding

question 19

Multiple Choice

PAW Industries has 5 million shares of common stock outstanding with a market price of $8.00 per share. The company also has outstanding preferred stock with a market value of $10 million, and 100,000 bonds outstanding, each with face value $1,000 and selling at 96 percent of par value. The cost of equity is 19 percent, the cost of preferred stock is 15 percent, and the cost of debt is 9 percent. If PAW's tax rate is 34 percent, what is the WACC?

• A)10.14 percent
• B)10.38 percent
• C)12.51 percent
• D)14.33 percent

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Definitions:

Accommodation Expenses

Costs associated with providing housing or lodging, either temporarily or permanently, for individuals such as employees or guests.

Business Flight

A flight taken for business purposes, often prioritizing time-efficiency and convenience.

Resignation Letters

Written notifications by an employee to inform an employer of their decision to leave the company.

Neutralize

To make something ineffective by applying an opposite force or effect, often used in the context of reducing or eliminating threats or negative impacts.