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QUESTION 5 Maple Corporation has a target capital structure of 55 percent common stock and 45 percent debt. Its cost of equity is 13.2 percent,
QUESTION 5 Maple Corporation has a target capital structure of 55 percent common stock and 45 percent debt. Its cost of equity is 13.2 percent, and the cost of debt is 6.8 percent. The relevant tax rate is 25 percent. What is Maple's WACC? 9.56% 10.92% 10.75% 10.21% 9.86% QUESTION 6 Cintas Company intends to invest in a new project. The investment cost is expected to be $27 million and will return $9.45 million for 5 years in net cash flows. The ratio of debt to equity (D/E) is 1 to 3. The cost of equity is 14.7%, the pretax cost of debt is 7.2%, and the tax rate is 25%. What is the appropriate discount rate? (Hint: Use the D/E ratio to calculate the weights of debt and equity) 12.74% 13.05% 13.61% 13.89% 12.38%
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