Calculate the weighted cost of debt for plan B from the following information. Debt New Debt Total

Calculate the weighted cost of debt for plan B from the following information.

 

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Debt New Debt Total Debt Equity Common Stock Price Number of shares Number of new shares Total number of shares EBIT Interest rate (old debt) Interest rate (new debt) Interest expense on old debt Interest expense on new debt Total Interest Expense Tax Rate Tax Net Income Eps EBIT Plan A eps Plan B eps Plan A $2,000,000 $2,000,000 $4 100,000 1,250,000 1,350,000 $800,000 5% 100,000 0 100,000 34% 238,000 462,000 0.342 400 0.147 -0.99 Plan B 100,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $5,000,000 $5,000,000 $5,000,000 $7,000,000 $2,000,000 $7,000,000 $2,000,000 $7,000,000 100,000 $800,000 5% 9% 100,000 450,000 550,000 34% 85,000 165,000 1.65 Plan A Plan B EBIT 50% below expectation 800 0.342 1.65 $4 100,000 1,250,000 1,350,000 100,000 $400,000 $400,000 5% 5% 9% 100,000 450,000 550,000 34% 100,000 0 100,000 34% 102,000 198,000 0.147 1,200 0.538 4.29 Plan A Plan B EBIT 50% above expectation 100,000 $4 100,000 1,250,000 1,350,000 100,000 $1,200,000 $1,200,000 5% 5% 9% 100,000 450,000 550,000 34% 100,000 0 100,000 34% -51,000 374,000 -99,000 726,000 -0.99 0.538 100,000 221,000 429,000 4.29 Debt New Debt Total Debt Equity Common Stock Price Number of shares Number of new shares Total number of shares EBIT Interest rate (old debt) Interest rate (new debt) Interest expense on old debt Interest expense on new debt Total Interest Expense Tax Rate Tax Net Income Eps EBIT Plan A eps Plan B eps Plan A $2,000,000 $2,000,000 $4 100,000 1,250,000 1,350,000 $800,000 5% 100,000 0 100,000 34% 238,000 462,000 0.342 400 0.147 -0.99 Plan B 100,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $5,000,000 $5,000,000 $5,000,000 $7,000,000 $2,000,000 $7,000,000 $2,000,000 $7,000,000 100,000 $800,000 5% 9% 100,000 450,000 550,000 34% 85,000 165,000 1.65 Plan A Plan B EBIT 50% below expectation 800 0.342 1.65 $4 100,000 1,250,000 1,350,000 100,000 $400,000 $400,000 5% 5% 9% 100,000 450,000 550,000 34% 100,000 0 100,000 34% 102,000 198,000 0.147 1,200 0.538 4.29 Plan A Plan B EBIT 50% above expectation 100,000 $4 100,000 1,250,000 1,350,000 100,000 $1,200,000 $1,200,000 5% 5% 9% 100,000 450,000 550,000 34% 100,000 0 100,000 34% -51,000 374,000 -99,000 726,000 -0.99 0.538 100,000 221,000 429,000 4.29

Answer rating: 100% (QA)

The weighted cost of debt for plan B is 0 Here is the working Interest rate on old debt 5 Interes... View the full answer