A firm has a capital structure with $75 million in equity and $75 million in debt. The cost of equity capital is 10% and the pretax cost of debt is 7%. If the marginal tax rate of the firm is 35%, compute the weighted average cost of capital of the firm. A. 7.6% B. 7.3% C. 8.4% D. 8.0%
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A firm has a capital structure with $75 million in equity and $75 million in debt. The
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- A company has the following target capital structure and costs: Capital structure Cost of capital Debt 30% 10% Common stock 60% 12% Preferred stock 10% 10% The company's marginal tax rate is 30%. What is the company's weighted-average cost of capital?Find the WACC given the following information: A firm has a cost of equity of 8% and cost of debt of 6.5%. The debt - toequity ratio is 0.75. The tax rate is 15%.A firm requires an investment of $30,000 and borrows $20,000 at 7%. If the return on equity is 16% and the tax rate is 25%, what is the firm's WACC? O A. 8.83% O B. 7.07% OC. 17.67% D. 10.6%
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- Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 10% preferred stock, and 55% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 22%. Debt The firm can sell for $1010 a 14-year, $1,000-par-value bond paying annual interest at a 9.00% coupon rate. A flotation cost of 4% of the par value is required. Preferred stock 8.00% (annual dividend) preferred stock having a par value of $100 can be sold for $94. An additional fee of $6 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $70 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.48 dividend payment, Do, that the company just recently…A company has determined that its optimal capital structure consists of 34 percent debt and the rest is equity. Given the following information, calculate the firm's weighted average cost of capital. Rd = 7.8%; Tax rate = 28 %: Po = $ 39.01; Growth = 5.1%; and D1 = $ 1.02. Show your answer to the nearest .1% Your Answer: AnswerA firm has a tax burden of 0.7. a leverage ratio of 1.3, an interest burden of .8, and a return-on-sales ratio of 10%. The firm generates $2.78 in sales per dollar of assets. What is the firm's ROE? A. 16.6% B. 12.4% C. 14.5% D. 20.2%