Question

Use the information in Exercise 2 and the following costs for individual financing sources to calculate the company’s weighted average after-tax cost of financing and cost of capital.
Sources Amounts
Retained earnings ........... $450,000
Share capital ............. 300,000
Trade and other payables ........ 300,000
Long-term borrowings ......... 900,000
Working capital loan ........ 70,000
Short-term borrowings ........ 200,000

Sources Cost (%)
Share capital ............ 14
Trade and other payables ....... 0
Retained earnings ......... 12
Long-term borrowings ....... 6
Short-term borrowings ....... 8
Working capital loan ......... 6.5



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  • CreatedDecember 03, 2014
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