Ford Motor Company Is Discussing New Ways to Recapitalize the Firm

question 104

Multiple Choice

Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital.Its current capital structure has a 20% weight in equity,10% in preferred stock,and 70% in debt.The cost of equity capital is 14%,the cost of preferred stock is 10%,and the pretax cost of debt is 9%.What is the weighted average cost of capital for Ford if its marginal tax rate is 30%?

• A)7.87%
• B)8.21%
• C)8.89%
• D)9.21%

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Definitions:

Prospects For The Future

Speculations or expectations about what may happen or be achieved in the time to come.

Marginal Situation

A scenario where an individual or group is at the brink of significant change, often on the verge of either improvement or deterioration.

Basic Assumption

An underlying, taken-for-granted belief or principle that is not questioned or critically examined.

Berger

Peter L. Berger is a sociologist known for his work in the sociology of knowledge, understanding how societal beliefs and values are shaped and maintained.