Poly's Parrot Shops Has Found That Its Cost of Common

question 12

Multiple Choice

Poly's Parrot Shops has found that its cost of common equity capital is 17 percent. It has 7-year maturity semiannual bonds outstanding with a price of $767.03 that have a coupon rate of 7 percent. The firm is financed with $120,000,000 of common shares (market value) and $80,000,000 of debt. What is the after-tax weighted average cost of capital for Poly's, if it is subject to a 35 percent marginal tax rate? Round your final percentage answer to two decimal places.

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

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Definitions:

Certificate

A formal document attesting to a certain fact, such as the completion of an educational process or the ownership of a stock.

Secretary of State

An official in the federal and state governments who is responsible for keeping records, managing governmental documents, and often overseeing elections.

Consolidations

The process of combining two or more entities into one, in terms of financial statements, companies, or assets.

Joining of the Businesses

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