Bleakly Enterprises Has a Capital Structure of 40 Percent Common

question 71

Multiple Choice

Bleakly Enterprises has a capital structure of 40 percent common stock,10 percent preferred stock,and 50 percent debt.The flotation costs are 4.5 percent for debt,7 percent for preferred stock,and 9.5 percent for common stock.The corporate tax rate is 34 percent.What is the weighted average flotation cost?

• A)5.8 percent
• B)6.2 percent
• C)6.4 percent
• D)6.6 percent
• E)6.8 percent

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Definitions:

Labor

The human effort, both physical and mental, used in the production of goods and services.

Service Business

A type of business that provides intangible products, such as expertise or time, to customers.

Location

The particular place or position where a person or property, especially a business, is situated, influencing factors like accessibility, visibility, and convenience.

Customer

An individual or business that purchases goods or services from a company.