Solve the following Multiple choice questions. Zonks Capital Structure: Debt $8,000,000 Preferred Stock $2,000,000 Common Equity $10,000,000
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Question:
Zonk’s Capital Structure: | |
Debt | $8,000,000 |
Preferred Stock | $2,000,000 |
Common Equity | $10,000,000 |
Total Assets | $20,000,000 |
Additional Information: | |
Pre-tax borrowing rate | 6% |
Preferred stock price per share | $50 |
Annual preferred dividend per share | $4 |
Common equity beta | 1.2 |
The effective income tax rate | 20% |
What is Zonk’s after-tax cost of debt?
5.6%
6.4%
7.2%
4.8%
What is Zonk’s cost of preferred stock?
7.6%
8.0%
6.0%
5.4%
What is Zonk’s cost of common equity? Assume that the riskless rate is 3% and the expected return on the market is 10%.
12.6%
11.4%
10.2%
8.8%
What is Zonk’s weighted average cost of capital?
9.68%
8.42%
7.36%
10.14%
Related Book For
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
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