A Tax-Paying Firm Is Currently Financed with 50% Debt and 50

question 92

Multiple Choice

A tax-paying firm is currently financed with 50% debt and 50% equity.The after-tax cost of debt is 6% and the cost of equity is 12%.If the firm issues some 8% preferred stock at par,then the firm's WACC will:

• A) increase.
• B) decrease.
• C) either increase or decrease depending upon the amount of stock issued.
• D) not be affected.

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Definitions:

Nasogastric

Relating to or involving the nose and the stomach, especially referring to a tube passed through the nose to the stomach for feeding or drainage.

Enteric Tube

A tube used to deliver food, fluids, and medications directly into the stomach or small intestine.

Nasointestinal Aspirate

A sample of fluid removed from the upper part of the small intestine through a tube inserted via the nose.

Gastric Aspirate

The process of removing the contents of the stomach through a tube for diagnostic or therapeutic purposes.