Assume That You Are an Intern with the Brayton Company,and

question 17

Multiple Choice

Assume that you are an intern with the Brayton Company,and you have collected the following data: The yield on the company's outstanding bonds is 7.75%;its tax rate is 40%;the next expected dividend is $0.65 a share;the dividend is expected to grow at a constant rate of 6.00% a year;the price of the stock is $15.00 per share;the flotation cost for selling new shares is F = 10%;and the target capital structure is 45% debt and 55% common equity.What is the firm's WACC,assuming it must issue new stock to finance its capital budget?

• A) 6.89%
• B) 7.26%
• C) 7.64%
• D) 8.04%
• E) 8.44%

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Definitions:

Thorazine

A medication also known as chlorpromazine, used to treat mental disorders such as schizophrenia by affecting the balance of neurotransmitters in the brain.

Haldol

A medication used in the treatment of schizophrenia, severe behavior problems, and Tourette's syndrome by reducing the activity of dopamine in the brain.

Schizophrenia

A mental disorder characterized by distortions in thinking, perception, emotions, language, self-awareness, and behavior, often manifesting through hallucinations and delusions.

MAO Inhibitors

Monoamine oxidase inhibitors (MAO inhibitors) are a class of medication used to treat certain types of mental disorders by preventing the breakdown of monoamine neurotransmitters, thus increasing their availability in the brain.