Assume a company that has a capital structure of 1.5. The debt that this company has has a cost (debt) of13%annually (after taxes) and the cost of the estate is25%annual. The tax rate is30%. 

a) Calculate the weighted average cost of the company's financing sources. 

b) The owner, concerned because "the company belongs to the bank more than his", decides to capitalize the company in such a way that the D/P ratio is equal to 1. 

- Is this convenient for the COMPANY?

Answer rating: 100% (QA)

a To calculate the weighted average cost of the companys financing sources we need to consider the p... View the full answer