1. You take out a $500 loan at 7% from Bank A and a $1,000 loan...

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1. You take out a $500 loan at 7% from Bank A and a $1,000 loan at 12% from Bank B. What is your weighted average cost of borrowing with the two loans before taxes? What is your overall cost of borrowing if you are in the 35% tax bracket? BANK A LOAN $500 BANK A RATE 7.00% BANK B LOAN $1,000 RATE 12.00% TAX RATE 35% BEFORE-TAX COST AFTER-TAX COST 2. A firm has $185 in equity at a cost of 12% and $65 in debt at a cost of 7% before taxes. If the firm's tax rate is 40%, what is its adjusted WACC? EQUITY S COSTOF EQUITY 185 1200.00% DEBT $ 65 BEFORE-TAX COST OF DEBT TAX RATE ADJUSTED WACC 7.0% 40 1. You take out a $500 loan at 7% from Bank A and a $1,000 loan at 12% from Bank B. What is your weighted average cost of borrowing with the two loans before taxes? What is your overall cost of borrowing if you are in the 35% tax bracket? BANK A LOAN $500 BANK A RATE 7.00% BANK B LOAN $1,000 RATE 12.00% TAX RATE 35% BEFORE-TAX COST AFTER-TAX COST 2. A firm has $185 in equity at a cost of 12% and $65 in debt at a cost of 7% before taxes. If the firm's tax rate is 40%, what is its adjusted WACC? EQUITY S COSTOF EQUITY 185 1200.00% DEBT $ 65 BEFORE-TAX COST OF DEBT TAX RATE ADJUSTED WACC 7.0% 40