The Market Value of Fords' Equity,preferred Stock,and Debt Are $6

question 19

Multiple Choice

The market value of Fords' equity,preferred stock,and debt are $6 billion,$2 billion,and $15 billion,respectively.Ford has a beta of 1.5,the market risk premium is 7%,and the risk-free rate of interest is 4%.Ford's preferred stock pays a dividend of $3 each year and trades at a price of $27 per share.Ford's debt trades with a yield to maturity of 8.5%.What is Ford's weighted average cost of capital if its tax rate is 30%?

• A)8.87%
• B)8.63%
• C)9.56%
• D)10.13%

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Definitions:

Political Risk

The potential for losses or other negative impacts to a business resulting from political changes or instability within a country.

Governmental Attitudes

The stance or policy approach adopted by a government towards a particular issue or sector.

Bureaucratic Risk

involves the uncertainties and slowdowns that can occur within an organization due to rigid procedures, policies, and hierarchies.

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.