Assume that for a public utility the following facts and estimates apply and are accepted: The rate

Question:

Assume that for a public utility the following facts and estimates apply and are accepted:

ki = 0.10 ke = 0.15 B V = 0.2 || t = 0.46.

The rate commission thinks that the capital structure should be B/V = 0.6 and has made the following calculation for WACC:

ko (10.46)0.10(0.6) +0.15(0.4) = = (0.054) (0.6) +0.06 0.0324 +0.06 = 0.0924.

Briefly evaluate the calculation.

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An Introduction To Accounting And Managerial Finance A Merger Of Equals

ISBN: 9789814273824

1st Edition

Authors: Harold JR Bierman

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Question Posted: Dec 12, 2023 03:38 AM

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Assume that for a public utility the following facts and estimates apply and are accepted: The rate

Question:

ki = 0.10 ke = 0.15 B V = 0.2 || t = 0.46.

Step by Step Answer:

The calculation provided is incorrect Lets evaluate the correct calculation Given ki 01 beforetax co...View the full answer

An Introduction To Accounting And Managerial Finance A Merger Of Equals

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