Peter's Audio Shop Has a Cost of Debt of 7%,a

question 6

Multiple Choice

Peter's Audio Shop has a cost of debt of 7%,a cost of equity of 11%,and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?

• A) 6.14%
• B) 6.54%
• C) 8.60%
• D) 9.14%
• E) 9.45%

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Definitions:

France

A country in Western Europe known for its cultural influence, history, and contributions to art, philosophy, and science, as well as its role in various global affairs.

Utopian Societies

Idealistic communities or societies aiming to create a perfect social, legal, and political system, often portrayed in literature and philosophy.

Charles Fourier

A French philosopher and social theorist known for his views on cooperative communities and the organization of society based on harmonious principles.

Nineteenth-Century

The period from 1801 to 1900, marked by widespread social, political, and industrial change around the world.