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Author Question: PrimaCare has a capital structure that consists of 7 million of debt, 2 million of preferred stock, ... (Read 22 times)

pane00

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on: Jul 10, 2018
PrimaCare has a capital structure that consists of 7 million of debt, 2 million of preferred stock,
  and 11 million of common equity, based upon current market values.
 
  The firm's yield to maturity
  on its bonds is 7.4, and investors require an 8 return on the firm's preferred and a 14 return on
  PrimaCare's common stock. If the tax rate is 35, what is PrimaCare's WACC?
  A) 12.25 B) 7.21 C) 8.12 D) 10.18

Question 2

The risk-return trade-off in managing a firm's working capital involves which of the following?
 
  A) a trade-off between debt and equity
  B) a trade-off between the firm's liquidity and its profitability
  C) a trade-off between liquidity and activity
  D) none of the above
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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Joy Chen

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Reply #1 on: Jul 10, 2018
Answer to Question 1

D

Answer to Question 2

B


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