Anson Jackson Court Company (AJC)
The Anson Jackson Court (AJC) currently has $150,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $89,000, and it is a zero growth company. AJC's current cost of equity is 10%, and its tax rate is 25%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.
Refer to the data for the Anson Jackson Court Company (AJC). What is AJC's current total market value and weighted average cost of capital?
Total Market Value; WACC
A. $650,000; 8.9%
B. $650,000; 9.4%
C. $750,000; 8.4%
D. $750,000; 8.9%
E. $750,000; 9.4%
Answer: D
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