Alto and Tenor Have 15,000 Shares of Stock Outstanding at a Market

question 22

Multiple Choice

Alto and Tenor have 15,000 shares of stock outstanding at a market price of $21 per share.The firm also has $140,000 of 6 percent bonds outstanding that are selling at par.The firm does not expect to pay taxes for the foreseeable future.The cost of equity is 14.7 percent.What is the value of R_WACC?

• A)12.02%
• B)7.38%
• C)10.83%
• D)8.64%
• E)11.09%

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Definitions:

Desert Animals

Fauna specially adapted to survive in desert climates, often featuring adaptations such as water conservation and temperature regulation.

Estivate

A period of dormancy or inactivity observed in some animals during hot or dry seasons to conserve energy.

Rainy Season

A period of the year characterized by increased rainfall compared to other periods, typically influenced by geographic and climatic factors.

Southern Hemisphere

The half of the Earth that is south of the Equator, characterized by opposite seasons to the Northern Hemisphere.