Question

The Basic Biotech Corporation wants to determine its weighted average cost of capital. Its target capital structure weights are 50 percent long-term debt and 50 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is in the 30 percent tax bracket. The current risk-free interest rate is 8 percent on Treasury bills. The after-tax cost of common equity capital is 14.5 percent. Calculate the after-tax weighted average cost of capital.


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  • CreatedMarch 27, 2015
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