Question: Spruce Systems capital structure is 55% equity and 45% debt. The cost of equity is 18% and the pre-tax cost of debt is 9%. The

Spruce Systems capital structure is 55% equity and 45% debt. The cost of equity is 18% and the pre-tax cost of debt is 9%. The tax rate is 20%. What is the weighted average cost of capital (WACC)? Enter your answer as a decimal (do not use the percent sign) Round your answer to 4 decimal points (0.000) 14.85

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 Accounting Questions!

Jeter Co. uses a perpetual inventory system and both an accounts receivable and an accounts payable subsidiary ledger. Balances related to both the general ledger and the subsidiary ledgers for Jeter...

make final answer very clear please Question 26 Spruce Systems capital structure is 35% equity and 65% debt. The cost of equity is 16% and the pre-tax cost of debt is 7%. The tax rate is 20%. What is...

Question 4 a) Beta Sky company has a target capital structure of 55% equity and 45% debt. Its cost of equity is 16% and the cost of debt is 9%. The relevant tax rate is 35%. What is Beta Sky's WACC?...

a) Beta Sky company has a target capital structure of 55% equity and 45% debt. Its cost of equity is 16% and the cost of debt is 9%. The relevant tax rate is 35%. What is Beta Sky's WACC? (6 marks)...

Whity Berhad bought a used printing machine 5 years ago hoping it would serve its printing needs for 10 years. Although the machine had performed as expected for the last five years, newer and more...

You are valuing a company at year end 2020 that has a target capital structure of 55% equity and 45% debt, That estimated cost of equity 12% and cost of debt(excluding tax effect) is 4%,...

XYZ Inc. has a target capital structure of 55% equity and 45% debt. Its cost of equity is 11% and the before-tax cost of debt is 5%. The relevant tax rate is 21%. Calculate the WACC for the firm....

Show Work ( no excel spreadsheet) 1. Cost of Equity, Cost of Debt, WACC (6 points) Suppose a firm has a beta of 1.5. The market risk premium is expected to be 9%, and the current risk-free rate is...

ww Q T DIVS xona FEN DORM SMEG A 2 I 159 BOTH4009 AL @** I www.wasa #D SPARK CRESTERE 609x r 99 Q TO HEL BIUS Patas pemas. Bi XbBQSAE CHCOR MDM A 2 ESOTHOO Type WREN - Question Completion Status:...

A company has an optimal capital structure of 55% equity and 45% debt. This year they expect to have retained earnings of $6m. They can raise up to $3m in long term debt at 5%. All additional debt...

A procedure is a collection of statements that performs a task. An event handler or event procedure is a type of procedure that is executed when an event, such as a mouse click, occurs while the...

Warren Mendoza, owner and proprietor of WEM Business Enterprise, had the following account balances on December 31, 2018. Cash Tools Warren Mendoza, Capital Taxes Expense Supplies Used Rents Earned...

Which one of the following is an indicator that an investment is acceptable? Option A Profitability index is greater than zero Option B Internal rate of return that exceeds the required return Option...

The ledger of Coquitlam Corporation at December 31, 2017, contains the following summary data: Your analysis reveals the following additional information: 1. The company has a 25% income tax rate. 2....

On the graph presented, match each element to its appropriatedescription. Element Description 1. Break-even point 2. Number of units of activity 3. Loss zone 4. Total cost 5. Total revenue 6. Dollars...

Danny Hill, the general manager of Southeastern Floor Covering Co., Inc. (SE), had full authority to run the business. His responsibilities included preparing and submitting bid proposals to general...

Match the definitions on the left with the most appropriate term on the right. Terms may be used once, more than once, or not atall. Description Terms 1. Buffer zone that identifies how A....

The Town Pool is considering investing $ 3,200 today in a popcorn maker. The annual cash profits from the machine will be $ 500 for each of the 10 years of its useful life. What is the IRR on the...

The planning effort by top management in large companies is more O A. disruptive B. strategic OC. contingent O D. flexible O E. operational Which of the following statements is true concerning...

4.38 In a Godiva shop, 40% of the cookies are plain truffles, 20% are black truffles, 10% are cherry cookies, and 30% are a mix of all the others. Suppose you pick one at random from a prepacked bag...

4.37 A public interest group hires students to solicit donations by telephone. After a brief training period students make calls to potential donors and are paid on a commission basis. Experience...

4.36 A state senator believes that 25% of all senators on the Finance Committee will strongly support the tax proposal she wishes to advance. Suppose that this belief is correct and that 5 senators...