Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal taxrate is 25%. Assume that the firm's cost of debt, rd, is 10.5%, the firm's cost of preferred stock, rp, is 9.7% and the firm's cost of equity is 13.1% for old equity, rs, and 13.6% for new equity, rę. What is the firm's weighted average cost ofcapital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places.What is the firm's weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places.%

Name: Quantitative Problem: Barton Industries expects that its target capit
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Description: Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal taxrate is 25

WACC (Weighted Average Cost of Capital): It is known as the firm's average cost of capital and is…

Business

Finance

capital (WACC;) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the firm's weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places. %

capital (WACC;) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the firm's weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places. %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 11P

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Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 10.7%, the firm's cost of preferred stock, rp, is 9.9% and the firm's cost of equity is 13.3% for old equity, rs, and 13.9% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places.
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