The L Corp. has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Calculate the firm’s weighted average cost of capital (WACC). Assume external equity for cost of equity calculation. rd before Tax = 8% , Tax = 40% , P0 = $40, Growth = 6% , D0 = $3.00, Flotation cost = 7% of market price 10.64% 13.05% 7.24% 8.61% 9.83%
The L Corp. has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Calculate the firm’s weighted average cost of capital (WACC). Assume external equity for cost of equity calculation. rd before Tax = 8% , Tax = 40% , P0 = $40, Growth = 6% , D0 = $3.00, Flotation cost = 7% of market price 10.64% 13.05% 7.24% 8.61% 9.83%
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
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The L Corp. has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Calculate the firm’s weighted average cost of capital (WACC). Assume external equity for
rd before Tax = 8% , Tax = 40% , P0 = $40, Growth = 6% , D0 = $3.00, Flotation cost = 7% of market price
10.64%
13.05%
7.24%
8.61%
9.83%
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