You are analyzing a firm that is financed with 60 percent debt and 40 percent equity. The

Question:

You are analyzing a firm that is financed with 60 percent debt and 40 percent equity. The current financing is 10 percent, but due to a recent downgrade by the rating agencies, the firm's is expected to increase to 12 percent immediately. How will this change the firm's weighted average if you ignore taxes?
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...