ABC Inc desires to maintain a capital structure of 80 equity and 20 debt They currently have an effective tax rate of 30 The company 's cost of equity capital is 12 To obtain their debt financing, they issue bonds with an interest rate of 10 What is the company 's weighted average cost of capital a...

Choice c is correct The cost of debt after tax equals 10 100 30 This is 10 70 which equals 7 Th ...

ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently have

Question:

ABC Inc. desires to maintain a of 80% equity and 20% debt. They currently have an effective tax rate of 30%. The company's capital is 12%. To obtain their debt financing, they issue bonds with an interest rate of 10%. What is the company's weighted average cost of capital?
a. 8.0%
b. 10.4%
c. 11.0%
d. 11.6%
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...