Question

1.

Sixx AM Manufacturing has a target debt—equity ratio of 0.59. Its cost of equity is 18 percent, and its cost of debt is 12 percent. If the tax rate is 31 percent, what is the company's WACC?

rev: 09_20_2012

12.27%

11.89%

15.11%

13.67%

14.39%

2.

The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.30 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 93 percent of its face value. What is the company's pre-tax cost of debt?

2.7 percent

10.8 percent

8.6 percent

5.9 percent

4.3 percent

Answer 1