Assume That You Are an Intern with the Brayton Company

question 55

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%

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Definitions:

Workplace Governance

The system of rules, practices, and processes by which a workplace is directed and controlled, balancing the needs of stakeholders.

Employee Equity

Ownership interest or stock options granted to employees as part of their compensation package, aligning their interests with the growth of the company.

Critical Industrial Relations

An analytical perspective within the field of industrial relations that examines the power dynamics between employers and employees, focusing on issues of inequality, conflict, and control.

Workplace Governance

The systems and processes used to direct and control the operations and conduct within a workplace, including the management of its employees.