Martin Corporation is financed with 40% debt and 60% common equity. The after tax cost of debt is 10% and the cost of common equity is 14%. What is Martins weighted average cost of capital?

Martin is considering reducing it debt load and is contemplating a 20% debt and 80% common equity mix. If they do this, what should happen to the cost of debt (not the weighted cost but the cost of each component)? The cost of equity (not the weighted cost)? Why?\

Per the book, what risk increases with the additional use of debt by a corporation?

Assume that the restructuring is completed and Martin is now 20% debt and 80% common equity. The after tax cost of debt is 8% and the cost of common equity is 10%. What is Martins new weighted average cost of capital?

Should Martin make the capital structure change mentioned in the prior problem?

Instead, assume that the restructuring is completed and Martin is now 20% debt and 80% common equity. But the after tax cost of debt is 9% and the cost of common equity is

13.5%. What is Martins new weighted average cost of capital?

Now, should Martin make the capital structure change mentioned in the prior problem?

For a given profitable corporation (that pays taxes), what is the most expensive form of capital (between debt and common equity)? Why? Please state two reasons.

What is the difference between the weighted average cost of capital for a corporation and the marginal weight average cost of capital?

When weighting the components of capital to calculate the weighted average cost of capital, is it better to use book weights or market weights?