Q8. Cost of capital Note: if there is no allocation to preferred stocks, you can ignore...
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Q8. Cost of capital Note: if there is no allocation to preferred stocks, you can ignore the component from preferred stocks. Weighted cost of capital 9% tax rate Firm Debt Equity Preferred 239,584.26 239,415.00 169.26 0.00 Amount X weight 0.07% 0.00% 99.93% 4.43% 0.04 7.83% 66551.72% before-tax cost 0.08 665,52 after-tax cost 0.04 0.00 0.00 cost component after-tax cost *% weight weighted average cost of capital (WACC) 4.02% 8-1 Weighted average cost of capital What does the WACC mean? 1) The average cost of financing or hurdle rate for the business 2) The average return required by the capital providers 3) The opportunity cost for the capital providers Q8. Cost of capital Note: if there is no allocation to preferred stocks, you can ignore the component from preferred stocks. Weighted cost of capital 9% tax rate Firm Debt Equity Preferred 239,584.26 239,415.00 169.26 0.00 Amount X weight 0.07% 0.00% 99.93% 4.43% 0.04 7.83% 66551.72% before-tax cost 0.08 665,52 after-tax cost 0.04 0.00 0.00 cost component after-tax cost *% weight weighted average cost of capital (WACC) 4.02% 8-1 Weighted average cost of capital What does the WACC mean? 1) The average cost of financing or hurdle rate for the business 2) The average return required by the capital providers 3) The opportunity cost for the capital providers
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Related Book For
Stats Data and Models
ISBN: 978-0321986498
4th edition
Authors: Richard D. De Veaux, Paul D. Velleman, David E. Bock
Posted Date:
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