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Manal Elkhoshkhany
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You were hired as a consultant to Locke Company and you ...

Resolved Question:

You were hired as a consultant to Locke Company and you were provided with the following data: Target capital structure: 40% debt, 10% preferred and 50% common equity. The interest rate on new debt is 7.5%, the yield on the preferred is 7.0%, the cost of retained earnings is 11.50%, and the tax rate is 40%. The firm will not be issuing any new stock. What is the firm's WACC? Show work.
A. 8.25%
B. 8.38%
C. 8.49%
D. 8.61%
E. 8.76%

Business risk is concerned with the operations of the firm. Which of the following is NOT associated with business risk?
a. demand variability
b. sales price variability
c. the extent to which operating costs are fixed
d. changes in required returns due to financing decisions
e. the ability to change prices as costs change
Submitted: 9 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 9 years ago.
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