% weight Capital raised No. of shares/Bonds issued Dividend/ Interest in 1st year Effective cost after tax savings Common stock 40% 2,00,000 20,000 30,000 30,000 Debt 40% 2,00,000 200 12,000 8,400 Preferred stock 20% 1,00,000 10,000 20,000 20,000 5,00,000 62,000 58,400 Capital raised accordingly for the company would be $ 62,000. The retained earnings of the company is $ 2,50,000 w
% weight Capital raised No. of shares/Bonds issued Dividend/ Interest in 1st year Effective cost after tax savings Common stock 40% 2,00,000 20,000 30,000 30,000 Debt 40% 2,00,000 200 12,000 8,400 Preferred stock 20% 1,00,000 10,000 20,000 20,000 5,00,000 62,000 58,400 Capital raised accordingly for the company would be $ 62,000. The retained earnings of the company is $ 2,50,000 w
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
|
Particulars |
% weight |
Capital raised |
No. of shares/Bonds issued |
Dividend/ Interest in 1st year |
Effective cost after tax savings |
|
Common stock |
40% |
2,00,000 |
20,000 |
30,000 |
30,000 |
|
Debt |
40% |
2,00,000 |
200 |
12,000 |
8,400 |
|
|
20% |
1,00,000 |
10,000 |
20,000 |
20,000 |
|
|
|
5,00,000 |
|
62,000 |
58,400 |
Capital raised accordingly for the company would be $ 62,000.
The
The tax effective cost of capital will be $ 58,400 using taxes at @30%
- Determine the company WACC.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education