Mangrove Fruit Farms has a $250,000 bond issue outstanding that is selling at 92 percent of face value

60.

Mangrove Fruit Farms has a $250,000 bond issue outstanding that is selling at 92 percent of face value. The firm also has 1,500 shares of preferred stock and 15,000 shares of common stock outstanding. The preferred stock has a market price of $35 a share compared to a price of $24 a share for the common stock. What is the weight of the preferred stock as it relates to the firm's weighted average cost of capital?    A.  6.75 percent B.  7.20 percent C.  7.75 percent D.  8.03 percent E.  8.17 percent

61.

Electronics Galore has 950,000 shares of common stock outstanding at a market price of $38 a share. The company also has 40,000 bonds outstanding that are quoted at 106 percent of face value. What weight should be given to the debt when the firm computes its weighted average cost of capital?    A.  42 percent B.  46 percent C.  50 percent D.  54 percent E.  58 percent

62.

Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 7.5 percent. The company also has 750,000 shares of 7 percent preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for $65 a share. The common stock has a beta of 1.34 and sells for $42 a share. The U.S. Treasury bill is yielding 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent. What is the firm's weighted average cost of capital?    A.  10.15 percent B.  10.64 percent C.  11.18 percent D.  11.30 percent E.  11.56 percent Re = 0.028 + 1.34 (0.112 - 0.028) = 0.14056 Rp = (0.07 × $100)/$65 = 0.10769   WACC = ($105m/$233.75m) (0.14056) + ($48.75m/$233.75m) (0.10769) + ($80m/$233.75m) (0.075) (1 - 0.38) = 10.15 percent