Using the WACC in Practice: Poly's Parrot Shops Has Found

question 55

Multiple Choice

Using the WACC in practice: Poly's Parrot Shops has found that its cost of equity capital is 17 percent. It has 7-year maturity bonds outstanding with a price of $767.03 that have a coupon rate of 7 percent. If the company is financed with $120,000,000 of ordinary shares (market value) and $80,000,000 of debt, then what is the after-tax weighted average cost of capital for Poly's if it is subject to a 35 percent company tax rate?

• A) 10.20%
• B) 11.76%
• C) 11.88%
• D) 13.32%

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Definitions:

Co-marriage

A marriage practice that involves more than two individuals entering into a marital relationship, recognized in some cultures.

Gift Exchange

A social, cultural, and economic practice involving the giving and receiving of gifts, which plays a crucial role in maintaining relationships and social cohesion.

Domestic Unit

A social group (usually a family) living together in a single dwelling or house, forming the basic unit of society for most human cultures.

Anthropological Definition

The definition pertaining to anthropology, which is the study of humans, human behavior, and societies in the past and present.