Suppose Simmons' Common Stock Has a Beta of 1

question 70

Multiple Choice

Suppose Simmons' common stock has a beta of 1.37,the risk-free rate is 3.4 percent,and the market risk premium is 8.2 percent.The yield to maturity on the firm's bonds is 7.6 percent and the debt-equity ratio is .45.What is the WACC if the tax rate is 23 percent and all interest is tax deductible?

• A)14.07 percent
• B)10.94 percent
• C)12.60 percent
• D)10.59 percent
• E)11.91 percent

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Definitions:

Prime Costs

The total of direct materials and direct labor costs associated with the production of goods.

Specialized Electronic Parts

Electronic components designed for specific applications or uses, often critical for the performance of specialized equipment.

Supplied Resources

The materials, labor, and other inputs provided for production or service delivery processes.

Production

The process of creating goods or services by combining labor, materials, and technology.