Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styro-foam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.

Assets
Current assets	$38,000,000
Net Plant, property, and equipment	$101,000,000
Total Assets	$139,000,000
Liabilities and Equity
Accounts Payable	$10,000,000
Accruals	$9,000,000
Current liabilities	$19,000,000
Long-Term debt (40,000 bonds, $1,000 per value)	$40,000,000
Total liabilities	$59,000,000
Common Stock (10,000,000 shares)	$30,000,000
Retained earnings	$50,000,000
Total shareholders' equity	$80,000,000
Total liabilities and shareholders' equity	$139,000,000

The stock is currently selling for $19.75 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $1,125.00. The beta is 1.45, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%.

Which of the following is the best estimate for the weight of debt for use in calculating the WACC?

Group of answer choices

17.07%

18.37%

18.56%

17.44%

18.74%

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Question 153.13 pts

Gator Fabrics Inc. currently has zero debt. It is a zero growth company, and it has the data shown below. Now the company is considering using some debt, moving to the new debt/assets ratio indicated below. The money raised would be used to repurchase stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, by how much would the WACC change, i.e., what is WACC_Old - WACC _New?

New Debt/Assets		40%	Orig cost of equity, rs	10.0%
New Equity/Assets		60%	New cost of equity = rs	11.0%
Interest rate new = rd		7.0%	Tax rate	40%
a)	1.70%
b)	1.72%
c)	2.05%
d)	2.15%
e)	1.93%

Group of answer choices

1.70%

1.72%

2.05%

2.15%

1.93%

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Question 163.13 pts

UltraFlex Diving Boards, Inc., just paid a dividend of $2.59. If the firm's growth in dividends is expected to remain at a constant 5 percent forever, what is the cost of equity capital for Ultra Flex Diving Boards if the price of its common shares is currently $62.00?

Group of answer choices

7.51%

9.39%

6.57%

9.18%