Assume That You Are an Intern with the Brayton Company,and

question 17

Multiple Choice

Assume that you are an intern with the Brayton Company,and you have collected the following data: The yield on the company's outstanding bonds is 7.75%;its tax rate is 40%;the next expected dividend is $0.65 a share;the dividend is expected to grow at a constant rate of 6.00% a year;the price of the stock is $15.00 per share;the flotation cost for selling new shares is F = 10%;and the target capital structure is 45% debt and 55% common equity.What is the firm's WACC,assuming it must issue new stock to finance its capital budget?

• A) 6.89%
• B) 7.26%
• C) 7.64%
• D) 8.04%
• E) 8.44%

---

Definitions:

College Professors

Faculty members of colleges or universities who teach, conduct research, and guide students in their academic pursuits.

Concurrent Engineering

A product development approach where different stages of product design and manufacturing are done simultaneously to reduce development time and improve efficiency.

Social Environment

The immediate physical and social setting in which people live or in which something happens or develops, including the culture that individuals are surrounded by.

Demographics

Statistical data relating to the population and particular groups within it, often used in marketing, policy making, and social research to understand and predict trends.