Ford Motor Company Is Discussing New Ways to Recapitalize the Firm

question 103

Multiple Choice

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 15%,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 30%?

• A)7.01%
• B)7.42%
• C)7.98%
• D)8.01%

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Definitions:

Innovation Sparcity

The lack or infrequent occurrence of creative or novel ideas, methods, or products in a specific area or domain.

Organizational Cultural Lag

The phenomenon where an organization's culture takes time to catch up with technological innovations, leading to a gap between current practices and potential efficiencies.

Creativity-Relevant Processes

Cognitive and behavioral processes that facilitate creative thinking, including problem-solving, risk-taking, and drawing connections between ideas.

Creativity

The ability to generate or recognize ideas, alternatives, or possibilities that may be useful in solving problems, communicating with others, and entertaining ourselves and others.