To Estimate the Company's WACC, Marshall Inc

question 3

Multiple Choice

To estimate the company's WACC, Marshall Inc.recently hired you as a consultant.You have obtained the following information.(1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1, 000, and a market price of $1, 050.00.(2) The company's tax rate is 40%.(3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20.(4) The target capital structure consists of 35% debt and the balance is common equity.The firm uses the CAPM to estimate the cost of common stock, and it does not expect to issue any new shares.What is its WACC?

• A) 7.16%
• B) 7.54%
• C) 7.93%
• D) 8.35%
• E) 8.79%

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Definitions:

Culture Of Honor

A societal norm that emphasizes honor, respect, and the readiness to use violence to protect one's reputation or family.

Cooperative Strategies

Approaches used by individuals or groups to work together towards a common goal, often involving mutual benefit.

Economically

Pertaining to the economy or the management of the resources of a community, country, etc., especially with a view to its productivity.

Sense Of Self

The sense of self refers to the way a person thinks about and views their own personality, beliefs, and abilities.