XYZ Industries Has 10 Million Shares of Stock Outstanding Selling

question 119

Multiple Choice

XYZ Industries has 10 million shares of stock outstanding selling at $10 per share and an issue of $30 million in 8.5 percent, annual coupon bonds with a maturity of 25 years, selling at 102 percent of par ($1,000) . If XYZ's weighted average tax rate is 40 percent and its cost of equity is 15 percent, what is XYZ's WACC?

• A)8.06 percent
• B)11.75 percent
• C)12.65 percent
• D)13.43 percent

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Definitions:

National Income

The total income earned by a country's residents and businesses, including wages, profits, and investment returns, reflecting the economic health of the nation.

Present Value

The value at present of future monetary sums or cash flow streams, determined by applying a given rate of return.

Interest

The payment made for the use of (borrowed) money.

Supply of Loanable Funds

The total amount of funds available for borrowing in the economy, determined by savings and influenced by interest rates.