Multiple Choice
Smith and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The firm's current after-tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. The firm expects to retain $15,000 in earnings over the next year. Where will a break in the WACC curve occur?
A) $12,500
B) $15,000
C) $30,000
D) $25,000
E) $42,500
Correct Answer:
Verified
Correct Answer:
Verified
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