You Were Hired as a Consultant to Kroncke Company,whose Target

question 82

Multiple Choice

You were hired as a consultant to Kroncke Company,whose target capital structure is 40% debt,10% preferred,and 50% common equity.The after-tax cost of debt is 6.00%,the cost of preferred is 7.50%,and the cost of retained earnings is 13.25%.The firm will not be issuing any new stock.What is its WACC?

• A)9.48%
• B)9.78%
• C)10.07%
• D)10.37%

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Definitions:

Price Level

An average of the current prices of goods and services in an economy, which can fluctuate with changes in production, demand, and inflation.

Laissez-Faire

An economic philosophy of free-market capitalism that opposes government intervention.

Great Depression

A severe worldwide economic downturn that took place during the 1930s.

Nominal GDP

Nominal GDP is the market value of all final goods and services produced within a country in a given period, measured in current prices.