Use the Data Provided on Cadbury to Answer the Question

question 85

Multiple Choice

Use the data provided on Cadbury to answer the question below.The risk free rate is 4.25%.The expected return on the market portfolio is 9.75%.The corporate tax rate is 40%.The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling.The coupon rate on Cadbury's bonds is 4.5%.Assume that the bonds pay annual coupons.The yield to maturity on Cadbury's bonds is 4.5%.Cadbury's bonds mature in 7 years.Cadbury has 1.650 billion common shares outstanding.The market price of Cadbury's common shares as of Dec 31,2008 is 6.25 pounds sterling.Cadbury's Beta is 0.8.What is Cadbury's cost of debt (after-tax) ?

• A) 2.70%
• B) 4.50%
• C) 7.80%
• D) 8.65%
• E) 8.70%

Recognize the importance of adjusting entries in the preparation of financial statements.

Understand the principles of revenue recognition and expense recognition (matching principle).

Identify the effects of recording revenues or expenses in incorrect periods.

Understand the concept of fiscal year and its implications for financial reporting.

---

Definitions:

Class Collaborator

A person from a particular social or economic class who works with members from another class, often in a political or economic context.

Pension Reform

Changes or adjustments made to pension policies to maintain their sustainability, often involving modifications to eligibility, benefits, or funding mechanisms.

Progressive Era

A period of widespread social activism and political reform in the United States from the 1890s to the 1920s, aiming to address issues caused by industrialization.

Elderly Citizens

Individuals of an advanced age, typically defined as senior citizens or those over the age of 65, recognized by society for their experience and wisdom.