Question: Evans technology has the following capital structure : debt : 45% common equity : 55 the after tax cost of debt is 6.50 percent ,

Evans technology has the following capital structure :

debt : 45%

common equity : 55

the after tax cost of debt is 6.50 percent , and the cost of common equity ( in the firm of retained earnings ) is 13.50 percent .

a. What if the firm's weighted average cost if Capital ?( don't round intermediate calculations. Input answers as a percent rounded to 2 decimals )

debt_________%weighted cost

common equity________%weighted cost

weighted average cost of capital__ ___% weighted cost .

an outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity.

under this new and more debt-oriented arrangement, the after tax cost of debt is 7.50 percent , and the cost of common equity (in the form of earnings ) is 15.50 percent .

b. Recalculate the Firms weighted average cost of capital (don't round intermediate calculations. Input answers as a percent rounded to 2 decimals)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

ANOVA Source of Variation SS df MS F p-value Between Groups 12.45 3 .0140 Within Groups 83.58 76 Total 96.03 79 Fill in the missing statistics in the ANOVA table.

there are 25 questions --- i feel totally lost please help1 1 Problem 10-14 Analyzing bond price changes [LO3] Katie Pairy Fruits Inc. has a $3,000, 22-year bond outstanding with a nominal yield of...

Q6 The aftertax cost of debt is 7.50 percent, and the cost of common equity (in the form of retained earnings) is 14.50 percent; a. What is the firm's weighted average cost of capital? (Do not round...

Evans Technology has the following capital structure. Debt 40 % Common equity 60 The aftertax cost of debt is 6 percent; and the cost of common equity (in the form of retained earnings) is 13...

Evans Technology has the following capital structure. Debt 40 % Common equity 60 The aftertax cost of debt is 7.00 percent, and the cost of common equity (in the form of retained earnings) is 14.00...

Evans Technology has the following capital structure. Debt 45% Common equity 55 The aftertax cost of debt is 6.50 percent, and the cost of common equity (in the form of retained earnings) is 13.50...

Evans Technology has the following capital structure. Debt 45 % Common equity 55 The aftertax cost of debt is 6.50 percent, and the cost of common equity (in the form of retained earnings) is 13.50...

Evans Technology has the following capital structure. Debt 25 % Common equity 75 The aftertax cost of debt is 8.00 percent, and the cost of common equity (in the form of retained earnings) is 15.00...

Please Help! Evans Technology has the following capital structure. Debt 30% Common equity 70. The aftertax cost of debt is 6.50 percent, and the cost of common equity (in the form of retained...

Evans Technology has the following capital structure. Debt 30% Common equity 70 The aftertax cost of debt is 6.50 percent, and the cost of common equity (in the form of retained earnings) is 13.50...

Using the Poisson formula, find the following probabilities. a. P(x

Consider the following two mutually exclusive projects: Whichever project you choose, if any, you require a 15 percent return on your investment. (a) If you apply the payback criterion, which...

Typical causes of the direct labor efficiency variance include Blank _ _ _ _ _ _ . Multiple select question. an out - of - date wage rate ( based , for example, on the existence of a new labor...

If superman has a mass of 100 Kg on his birth planet Krypton, where the acceleration of gravity is 25 m/s2, determine (a) His weight on Krypton, in N, and (b) His mass, in Kg, and weight, in N, on...

Schwarzentraub Industries expected free cash flow for the year is $500,000; in the future, free cash flow is expected to grow at a rate of 9%. The company currently has no debt, and its cost of...

Two stones are thrown vertically up at the same time. The first stone is thrown with an initial velocity of 11.0m/s from a 12th-floor balcony of a building and hits the ground after 4.5s. With what...

Todd Motor Company manufactures automobiles. During September 2010 the company purchased 5,000 head lamps at a cost of $9 per lamp. Todd withdrew 4,650 lamps from the warehouse during the month....

In CVP analysis gross margin is a less-useful concept than contribution margin . Do you agree? Explain briefly.

Design a minimum-mass symmetric three-bar truss (the area of member 1 and that of member 3 are the same) to support a load P, as was shown in Fig. 2.9. The following notation may be used: Pu = P cos...

U.S. unemployment rate, part 2. Using the data from Exercise 50, develop and compare the following models. a) Fit an appropriate autoregressive model by testing for the significance of each...

Mutual funds. The money that is invested in mutual funds is often referred to as Fund Flows. The following time series plot shows the monthly Fund Flows ($M) from January 1990 to October 2002. a)...

U.S. unemployment rate. Following is the time series plot for the monthly U.S. Unemployment rate (%) from January 1997 to March 2007. These data have been seasonally adjusted (meaning that the...