Question 8

1 Point

What is the Weighted Average Cost of Capital?

9.09%

16.16%

23.60%

25.25%

Question 7

1 Point

What is the Weight of the Debt?

5.21%

35.55%

40.76%

59.24%

Question 6

1 Point

What is the Market Value of the Firm?

$50,000,000

$54,400,000

$80,000,000

$84,400,000

Suppose you are provided the following information as it relates to College Products, Inc. (CPI) capital structure:

• There are 30,000 coupon bonds which pay an 8% annual coupon with 10 years to maturity and currently have a yield to maturity of 8% (assume annual compounding and face value = $1,000)
• There are 100,000 preferred shares outstanding which pay a $4 dividend per share and currently sells for $44 per share. Par Value is $20 per share.
• The common stock currently sells for $25 per share. There are 2 million common shares outstanding.
• The beta of the common stock is 1.6, the market risk premium is 11%, and the risk free rate is 6%.
• The firms tax rate is 40%.

Using the information provided above, determine the following: