Question
Prelevain is trying to decide whether to invest in a new line of business, selling premade bread in the freezer section at grocery stores, and
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Prelevain is trying to decide whether to invest in a new line of business, selling premade bread in the freezer section at grocery stores, and wants to calculate their WACC. Assume that their capital structure consists of 58% common stock, 12% preferred stock, and 30% debt. Further, analysts predict that their future cost of debt will be 6% and their cost of preferred stock is 11%. We also know that the current price of common stock is $35 and that the common stock is expected to pay a $2.00 dividend each year. The firms tax rate is 20%. What is this firms WACC?
A. 6.07%
B. 22.71%
C. None of these
D. 7.57%
E. 6.43%
Prelevain is trying to decide whether to invest in a new line of business, selling premade bread in the freezer section at grocery stores, and wants to calculate their WACC. Assume that their capital structure consists of 58% common stock, 12% preferred stock, and 30% debt. Further, analysts predict that their future cost of debt will be 6% and their cost of preferred stock is 11%. We also know that the current price of common stock is $35 and that the common stock is expected to pay a $2.00 dividend each year. The firms tax rate is 20%. What is this firms WACC?
| A. | 6.07% | |
| B. | 22.71% | |
| C. | None of these | |
| D. | 7.57% | |
| E. | 6.43% |
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Financial Management Theory And Practice
Authors: Prasanna Chandra
11th Edition
9355322208, 978-9355322203
