Given the information for the SXH company below:

1. Market value costs
2. Common stock $3,100,000. 12.5%
3. Bonds. $4,500,000. 7.5%
4. Preferred stock. $600,000. 4.5%
5. $8,200,000
6. Firms tax rate is 25%

1. calculate capital structure weights

2. given that cost of the bond is pretax, calculate WACC

3. what does WACC tell us?

4. if SXH return on capital is less than wacc, what is implication

5. if management decides to sell more bonds to raise debt capital, what is impact of WACC?

Answer rating: 100% (QA)

Formula snip of 1 and 2 3 WACC is the entitys weighted cost of capital it indicates t... View the full answer