In the fall of 2009, Grey Manufacturing was considering a major expansion of its manufacturing operations....
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In the fall of 2009, Grey Manufacturing was considering a major expansion of its manufacturing operations. The firm has sufficient land to accommodate the doubling of its operations, which will cost $200 million. To raise the needed funds Grey's management has decided to simply mimic the firm's present capital structure as follows: SOURCE OF CAPITAL Debt Common stock Total AMOUNT OF FUNDS RAISED ($) $ 80,000,000 120,000,000 $200,000,000 PERCENTAGE OF TOTAL 40% 60% 100% AFTER-TAX COST OF CAPITAL 5.20% 14.50% What is your estimate of Grey's weighted average cost of capital? *You may assume that these after-tax costs of capital have been appropriately adjusted for any transaction costs incurred when raising the funds. In the fall of 2009, Grey Manufacturing was considering a major expansion of its manufacturing operations. The firm has sufficient land to accommodate the doubling of its operations, which will cost $200 million. To raise the needed funds Grey's management has decided to simply mimic the firm's present capital structure as follows: SOURCE OF CAPITAL Debt Common stock Total AMOUNT OF FUNDS RAISED ($) $ 80,000,000 120,000,000 $200,000,000 PERCENTAGE OF TOTAL 40% 60% 100% AFTER-TAX COST OF CAPITAL 5.20% 14.50% What is your estimate of Grey's weighted average cost of capital? *You may assume that these after-tax costs of capital have been appropriately adjusted for any transaction costs incurred when raising the funds.
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Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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