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Multiple choice

14. TRJ has 12,000 shares of common stock outstanding at a market price of 31.16 a share, 4500 of preferred stock outstanding at 45 a share, and 500 bonds outstanding that are selling for 89 percent of their $1000 face value. The firms pre-tax cost of debt is 8.9%. The cost of equity is 14.7% and the cost of preferred is 8.8%. What is the firm's weighted average cost of capital if the tax rate is 34%?

a. 8.47%
b. 9.69%
c. 10.37%
d. 10.92%

15. Anna is considering a new project. Annas management has determined the required return for this new project should be based on the weighted average cost of capital for Beta Co. What approach did Alpha's managers use to determine the project's required rate of return?
a. subjective
b. objective
c. pure play
d. alternate play

Solution Preview

14. Please see the attached file. The WACC comes to 9.69%

15. pure play approach
If the ...

Solution Summary

The solution explains two multiple choice questions relating to finance