Tardy Clocks Inc

question 66

Multiple Choice

Tardy Clocks Inc.(TC) has long term bonds with a face value of $6M,the coupon rate on the bonds is 6% and the yield on the bonds is also 6%.The unlevered cost of equity is 10% and the value of TC's equity is $9.1M.The corporate tax rate is 35%.What is the required return of shareholders at Tardy?

• A) 6.00%
• B) 10.00%
• C) 10.92%
• D) 11.71%
• E) 12.57%

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Definitions:

Investment

The process of distributing funds or resources with the aim of achieving income or financial gain.

Corporate Profits Tax

A tax imposed on the income or profit of corporations, calculated as a percentage of their earned income.

Investment

The distribution of funds or other resources with the aim of achieving income or profit at a later date.

Business Firms

Organizations involved in the trade of goods, services, or both to consumers, operating in an attempt to profit.