Baxter Inc

question 62

Multiple Choice

Baxter Inc.has a target capital structure of 30% debt,15% preferred stock,and 55% common equity.The company's after-tax cost of debt is 7%,its cost of preferred stock is 11%,its cost of retained earnings is 15%,and its cost of new common stock is 16%.The company stock has a beta of 1.5 and the company's marginal tax rate is 35%.What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?

• A) 11.20%
• B) 12.00%
• C) 13.80%
• D) 14.45%

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Definitions:

Draw-A-Man

A projective psychological test where individuals are asked to draw a human figure, often used to assess personality traits and cognitive development.

Projective Personality

Assessment techniques that use unstructured stimuli, such as inkblots or ambiguous pictures, to elicit responses that reveal facets of an individual's personality.

Objective Personality

A concept or framework used in psychology to classify and assess individual personality traits in an unbiased, quantifiable manner.

Revised

Updated or modified to correct or improve upon a previous version.