If the average interest rate on debt is 11 percent
If the average interest rate on debt is 11 percent, what is the cost of capital?
Refer to E12.1.
Russell Corporation’s capital structure 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?
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