Assume JUP Has Debt with a Book Value of $20

question 79

Multiple Choice

Assume JUP has debt with a book value of $20 million,trading at 120% of par value.The bonds have a yield to maturity of 6%.The firm has book equity of $20 million,and 2 million shares trading at $18 per share.The firm's cost of equity is 12%.What is JUP's WACC if the firm's marginal tax rate is 35%?

• A)9.60%
• B)8.76%
• C)9.00%
• D)6.24%
• E)7.34%

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Definitions:

Assets

Economic resources or owned items of value that an individual, corporation, or country possesses, expected to provide future benefits.

Money Supply

The overall pool of money within an economy at a certain time, including all forms of cash, coinage, and funds in checking and savings accounts.

Spanish Currency

The Euro, which is the official currency of Spain, part of the Eurozone countries that have adopted the euro (€) as their legal tender.

Commercial Banks

Financial institutions that provide a range of services such as accepting deposits, lending money, and offering investment products.