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:

EPSP

Excitatory postsynaptic potential; a temporary increase in postsynaptic membrane potential caused by the flow of positively charged ions into the postsynaptic cell, making it more likely for a neuron to fire.

IPSP

Inhibitory postsynaptic potential, a type of synaptic potential that makes a neuron less likely to generate an action potential.

Action Potential

A rapid rise and subsequent fall in voltage or membrane potential across a cellular membrane, momentarily allowing the cell to become depolarized.

Depolarization

The process by which the electrical charge of a cell membrane becomes less negative, leading to the generation of an action potential in neurons.