Westonci.ca is the ultimate Q&A platform, offering detailed and reliable answers from a knowledgeable community. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.
Sagot :
If the cost of equity is 12% , cost of debt 10%, tax rate 25%, 20 million market value of debt , 60 million market value of equity then the weighted average cost of capital is 10.875%
Given cost of equity is 12% , cost of debt 10%, tax rate 25%, 20 million market value of debt , 60 million market value of equity.
We know that weighted average cost of capital= cost of equity* weight of equity+ cost of debt* weight of debt.
Cost of debt (consider after tax)=10%(1-25%)
=10%*0.75
=0.075
Weight of equity=60/80
=0.75
Weight of debt=20/80
=0.25
Weighted average cost of capital=12%*0.75+0.075*0.25
=0.09+0.01875
=0.10875
=10.875%
Hence the weighted average cost of capital is 10.875%
Learn more about weighted average at https://brainly.com/question/18554478
#SPJ4
Thanks for using our service. We aim to provide the most accurate answers for all your queries. Visit us again for more insights. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.
