A company has a capital structure comprising 40% debt. New debt can be raised at an...
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A company has a capital structure comprising 40% debt. New debt can be raised at an interest rate of 12%. The company's dividend yield is 9% and it is expected to grow at 5%. If the tax rate is 48%, determine the weighted average cost of capital. The cost of equity capital is expected to rise as a result of excessive debt. If the cost of equity as a function of debt is given in the table below, determine the optimal capital structure. Assume that the cost of debt is 10% and the tax rate is 35%. Percentage Debt Cost of Equity Capital 10.0 10.1 10.2 10.3 10.5 11.0 11.5 13.5 16.0 0 10 20 30 40 50 60 70 80 A company has a capital structure comprising 40% debt. New debt can be raised at an interest rate of 12%. The company's dividend yield is 9% and it is expected to grow at 5%. If the tax rate is 48%, determine the weighted average cost of capital. The cost of equity capital is expected to rise as a result of excessive debt. If the cost of equity as a function of debt is given in the table below, determine the optimal capital structure. Assume that the cost of debt is 10% and the tax rate is 35%. Percentage Debt Cost of Equity Capital 10.0 10.1 10.2 10.3 10.5 11.0 11.5 13.5 16.0 0 10 20 30 40 50 60 70 80
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Answer rating: 100% (QA)
1 Determine the weighted average cost of capital WACC Given information Debt percentage DV 40 Debt i... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
Posted Date:
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