If the average interest rate on debt is 11 percent, what is the cost of capital Refer to E12 1 Russell Corporations capital structure consists of $ 5,000,000 of assets and $ 2,000,000 of liabilities Joe Russell, the corporations CEO and largest shareholder, says that the debt has an average interes...

If the average interest rate on debt is 11 percent, what is the cost of capital? Refer

Question:

If the average interest rate on debt is 11 percent, what is the cost of capital?
Refer to E12.1.
Russell Corporation’s consists of $ 5,000,000 of assets and $ 2,000,000 of liabilities. Joe Russell, the corporation’s CEO and largest shareholder, says that the debt has an average interest rate of 9 percent and that shareholders want a 16 percent return. What is Russell Corporation’s cost of capital?
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...