A Firm Has a Capital Structure That Uses 45 Percent

question 35

Multiple Choice

A firm has a capital structure that uses 45 percent equity,20 percent preferred shares,and 35 percent debt.The preferred shares have a current yield of 5.5 percent.The debt has a coupon rate of 10 percent and a current yield to maturity of 6.5 percent.The common shares have a yield of 8 percent.The tax rate is 25 percent.What is the firm's WACC?

• A) 5.231%
• B) 6.700%
• C) 6.406%
• D) 6.975%

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Definitions:

Vocal Cords

Paired bands of muscle tissue located in the larynx (voice box) that vibrate to produce sound when air is expelled from the lungs.

Epiglottis

A leaf-shaped flap in the throat that prevents food and drink from entering the windpipe during swallowing.

Tension

A physical or psychological state of being stretched tight which can refer to the force applied to something or a feeling of strain and anxiety.

Trachea

A cylindrical tube within the respiratory system that provides air flow to and from the lungs for respiration.