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Watson's Automotive has a $400,000 bond issue outstanding that is selling at 70 percent of face value. Watson's also has 21,000 shares of common stock
Watson's Automotive has a $400,000 bond issue outstanding that is selling at 70 percent of face value. Watson's also has 21,000 shares of common stock outstanding with a market price of $21 a share. What is the weight of the debt as it relates to the firm's weighted average cost of capital?
Select one:
a. 37 percent
b. 48 percent
c. 42 percent
d. 46 percent
e. 40 percent
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