Weighted average cost of capital for audio shop

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1. Al's Audio has a cost of debt of 5 percent, a cost of equity of 11 percent, and a cost of preferred stock of 8 percent. The weight for debt is 0.16, the weight for preferred shares is 0.34, and the weight for common stock is 0.5. The company's tax rate is 34 percent. What is the weighted average cost of capital for Al's Audio Shop?

a. 8.75 percent

b. 8.98 percent

c. 6.14 percent

d. 9.15 percent

e. 9.45 percent

2. A project costs $450 and has cash flows of $110 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

a. The project never pays back

b. 5.33 years

c. 4.60 years

d. 6.00 years

e. 5.67 years

Reference no: EM132020339

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