RSGreen Has 250,000 Shares of Common Stock Outstanding at a Market

question 93

Multiple Choice

R.S.Green has 250,000 shares of common stock outstanding at a market price of $28 a share.Next year's annual dividend is expected to be $1.55 a share.The dividend growth rate is 2 percent.The firm also has 7,500 bonds outstanding with a face value of $1,000 per bond.The bonds carry a 7 percent coupon,pay interest semiannually,and mature in 7.5 years.The bonds are selling at 98 percent of face value.The company's tax rate is 34 percent.What is the firm's weighted average cost of capital?

• A)5.4 percent
• B)6.2 percent
• C)7.5 percent
• D)8.5 percent
• E)9.6 percent

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Definitions:

Golf Courses

Large areas of land designed for the sport of golf, featuring 9 or 18 holes where players aim to hit balls into each hole with the fewest number of strokes.

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Income Elasticity

A measure of how the demand for a good or service changes in response to a change in consumers' income.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a specified period of time.