Question
Geronimo Corp is financed 60% with equity and 40% with debt. Currently, its debt has a before-tax yield to maturity of 5%. Geronimo's common stock
Geronimo Corp is financed 60% with equity and 40% with debt. Currently, its debt has a before-tax yield to maturity of 5%. Geronimo's common stock has a beta of 1.5 and market risk premium is 8% while risk free rate is 1%. If the tax rate is 40%, what is Geronimo's weighted average cost of capital (WACC)?
- A. 9.00%
- B. 7.83%
- C. 10.20%
- D. 7.4%
- E. 11.47%
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Focus On Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert Hughes, Melissa Hart
6th Edition
125991965X, 978-1259919657
