Slick enterprises has the following capital structure: loans, 10% ..........................................$100,000 loans 15% .........................................$100,000 account payable .............................$300,000 mortgage
Question:
Slick enterprises has the following capital structure:
loans, 10% ..........................................$100,000
loans 15% .........................................$100,000
account payable .............................$300,000
mortgage 8% ...................................$400,000
total liabilities .................................900,000
common stock ...............................100,000
10,000 * $10 ..................................100,000
total liabilty and equity ............$1,000,000
Account payable over 30 days old incur a cost of 1.5% per month. about half the accounts are older than 30 days. Common stock has a market price of $15 and earnings per share of $3.50 after taxes, of which $1.50 is paid as dividends.
a. Obtain a weighted average cost of capital, assuming a marginal tax of 40%
b. Is your numerical answer in part a a good value to use for minimum attractive rate of return? explain
Expert Answer:
a Calculation of weighted average cost of capital Marginal tax is assumed at 40 Acc... View the full answer
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
