Consider the Following: the Market Value of Roxy Stock Is

question 50

Multiple Choice

Consider the following: the market value of Roxy stock is $17 a share (with 3,000,000 shares outstanding and the next annual dividend is expected to be $1.00) ,the bonds are currently selling for $1020 (semi-annual coupon payments of $25; maturing in 20 years; 20,000 bonds in the market) ,the preferred stock currently is $30 per share (paying dividends of $3 in perpetuity,100,000 shares outstanding) ; if the tax rate is 40%,what is the firm's WACC?

• A) 5.76%
• B) 5.23%
• C) 5.88%
• D) 6.91%

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life, taken into consideration for depreciation calculations.

Net Present Value

A financial metric that calculates the value of a projected income stream in today's dollars, net of the initial investment.

Discount Factor(s)

A multiplier used in discounted cash flow analysis to determine the present value of future cash flows, reflecting the time value of money.

Discount Rate

Discount rate is the interest rate used to determine the present value of future cash flows, essential in evaluating investment opportunities and financial decisions.