Clothier,Inc

question 40

Multiple Choice

Clothier,Inc.has a target capital structure of 40% debt and 60% common equity,and has a 40% marginal tax rate.If Clothier's yield to maturity on bonds is 7.5% and investors require a 15% return on Clothier's common stock,what is the firm's weighted average cost of capital?

• A) 7.20%
• B) 10.80%
• C) 12.00%
• D) 12.25%

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Definitions:

Organizational Pattern

The structured arrangement and presentation of ideas or information in a coherent and logical way.

Functional

Designed to be practical and useful, rather than purely decorative, focusing on what something does or is used for.

Direct

To manage or guide by giving commands or instructions with authority.

Deductive

A logical process in which a conclusion is based on the concordance of multiple premises that are generally assumed to be true.