Assume Ford Motor Company Is Discussing New Ways to Recapitalize

question 23

Multiple Choice

Assume Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 10% weight in equity, 20% in preferred stock, and 70% in debt. The cost of equity capital is 16%, the cost of preferred stock is 10%, and the pretax cost of debt is 8%. What is the weighted average cost of capital for Ford if its marginal tax rate is 40%?

• A) 6.61%
• B) 6.96%
• C) 7.31%
• D) 7.66%

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Definitions:

Team Building

The process of creating stronger and more cohesive working groups through various activities and initiatives.

Operating Effectiveness

Refers to the efficiency and productivity with which an organization or system performs its operational processes, aiming at achieving its objectives with minimal resources and waste.

Decision Making

The process of making choices by identifying a decision, gathering information, and assessing alternative solutions.