ABC Inc. wants to maintain a capital structure of 80% equity and 20% debt. They currently have
Question:
ABC Inc. wants 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. 8.0%
b. 10.4%
c. 11.0%
d. 11.6%
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To compute the WACC we will use the formula WACC Cost of equity x of e...View the full answer
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Related Book For 
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan
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