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Calculate the companys weighted average costs of capital

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Reference no: EM131056440

Question:

The Expanding Capital Corporation has a current capital structure of $15 million in secured bonds paying 6.5% annual interest, $10 million in preferred stock with a par value of $50 per share and an annual dividend of $3.80 per share, and common stock with a book value of $75 million. It is about to issue new debentures in the amount of $10 million paying 7.5% annual interest. Its CFO says its marginal tax rate is 30% and its cost of common equity capital is 12%.

Calculate the company's Weighted Average Costs of Capital for the following:

Before the new bond issue
After the new bond issue

Reference no: EM131056440

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