A Firm Is 40% Financed by Debt with a Yield-To-Maturity

question 87

Multiple Choice

A firm is 40% financed by debt with a yield-to-maturity of 8.5%.The equity has a beta of 1.3,the market risk premium is 8.4% and the risk-free rate is 3.8%.What is the firm's WACC if the tax rate is 34%?

• A) 10.74%
• B) 11.08%
• C) 11.61%
• D) 11.38%

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Definitions:

Woody Plants

Plants that produce wood as their structural tissue and typically have perennial growth, such as trees and shrubs.

Meristem Tissues

Regions in plants comprised of undifferentiated cells capable of division and growth, responsible for the plant's growth in length and girth.

Phloem

The vascular tissue in plants responsible for the transport of nutrients, particularly sugar, throughout the plant.

Bark

External part of a tree, containing cork, cork cambium, and phloem.