Question: Consider your answer to Question #10. The way to determine the after-tax cost for this type of capital is to multiply its pre-tax cost by
Consider your answer to Question #10. The way to determine the after-tax cost for this type of capital is to multiply its pre-tax cost by the firm's corporate income tax rate multiply its pre-tax cost by (1 + the firm's corporate income tax rate) multiply its pre-tax cost by (1 - the firm's corporate income tax rate) divide its pre-tax cost by the firm's corporate income tax rate Ingham Widget Mfg., Inc.'s capital structure consists of 50 percent debt. 10 percent preferred stock, and 40 percent common stock. The firm's pretax cost of debt, s 6.00 percent. Its pretax cost of preferred stock is 10.00 percent, and its pretax cost of common equity is 15.00 percent. The firm's corporate income tax rate is 35 percent. The firm's weighted average cost of capital (WALL) 6.50 percent 8.60 percent 8.95 percent 10.00 percent Bonus Question. True False. According .o the Ne. Present Value (NPV) method, all project with a positive NPV, should be funded. True False The text discussed the firm's weighted average cost of capital (WACC) and the firm's marginal cost of capital. The difference between these two discount rates is that WACC is the after tax marginal cost of capital. The marginal cost of capital is the after-tax WACC. WACC is used to determine the NPV for the firm's new projects, while the marginal cc of capital is used to determine the NPV for existing projects. WACC is used to determine the NPV for the firm's existing projects, while the margin cost of capital is used to determine the NPV for new projects. In an orderly manner. 1, being the least risky, and 4 the riskiest, please organize the following assets from least to riskiest asset class. 1 Common Stock, 2 Preferred Stock, 3 Corporate Bonds. 4 Bank Debt. 1 Preferred Stock, 2. Common Stock. 3 Corporate Bonds, 4 Bank Debt. 1 Corporate Bonds, 2 Bank Debt, 3 Preferred Stock, 4 Common Stock I). 1 Bank Debt., 2 Corporate Debt, 3 Preferred Stock, 4 Common Stock
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