Peter's Audio Has a Yield to Maturity on Its Debt

question 58

Multiple Choice

Peter's Audio has a yield to maturity on its debt of 7.8 percent,a cost of equity of 12.4 percent,and a cost of preferred stock of 8 percent.The firm has 105 shares of common stock outstanding at a market price of $22 a share.There are 25 shares of preferred stock outstanding at a market price of $45 a share.The bond issue has a total face value of $1,500 and sells at 98 percent of face value.If the tax rate is 21 percent,what is the weighted average cost of capital assuming all interest is tax deductible?

• A)9.68 percent
• B)8.54 percent
• C)8.69 percent
• D)9.52 percent
• E)9.45 percent

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Definitions:

Mind

The element of a person that enables them to be aware of the world and their experiences, to think, and to feel; the faculty of consciousness and thought.

Functionalism

A perspective in psychology and philosophy that considers mental life and behavior in terms of active adaptation to environmental challenges.

William James

A pioneering American psychologist and philosopher recognized for his contributions to pragmatism and functional psychology.

Mind's Operations

The processes or activities by which the mind engages in thought, including reasoning, memory, and problem-solving.