Able Company's Shareholders Are Receiving a 22

question 1

Multiple Choice

Able Company's shareholders are receiving a 22.5%return and its bondholders get a 14% return. Based on a 50 percent debt/equity ratio, with no preferred stock and a 46 percent tax rate, find Able's weighted average cost of capital.

• A)12.54 percent
• B)14.47 percent
• C)15.03 percent
• D)17.52 percent

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Definitions:

Common Law

A body of unwritten laws based on legal precedents established by the courts, as opposed to statutory laws enacted by legislative bodies.

Assignment Law

Legal principles covering the transfer of rights, duties, or properties from one party to another.

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Indicates a scenario where a warranty is not explicitly stated but is inferred from actions, circumstances, or the nature of a transaction.

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The party in a contractual agreement who transfers rights or obligations to another, known as the assignee.