The Felix Filter Corp

question 39

Multiple Choice

The Felix Filter Corp. maintains a debt-equity ratio of .6. The cost of equity for Richardson Corp. is 16%,the cost of debt is 11% and the marginal tax rate is 30%. What is the weighted average cost of capital?

• A) 8.38%
• B) 11.02%
• C) 12.89%
• D) 13.00%
• E) 14.12%

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Definitions:

Marginal Revenue

The additional income that a company generates from selling one more unit of a good or service.

Pure Monopolist

A market participant that is the sole supplier of a unique product without close substitutes, possessing significant control over market prices.

Total Revenue

The total income earned by a firm from selling its products or services.

Demand Schedule

A presentation showing the level of demand from buyers for a product or service, matched to their willingness and ability to pay at various price scales.