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Calculate the weighted average cost of capital

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The common stock and debt of Android Corp. are valued at $40 million and $35 million, respectively. Investors currently require a 20% return on the common stock and a 4% return on the debt. There are no taxes.

Calculate the weighted average cost of capital, 12.53%

If Android Corp. issues an additional $11 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Recall that the WACC under the inital capital structure is 12.53. Assume that the change in capital structure does not affect the risk of the debt

Reference no: EM133056042

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