Compute Subtle Edge weighted average cost of capital

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Question - Subtle Edge, Inc. presents the following excerpts from its December 31, 2017 balance sheet:

Current Liabilities:

Notes payable, 8% $ 200,000

Long-Term Liabilities:

Bonds payable, 10% 1,000,000

Shareholders' Equity

Common stock, par 50,000

Additional paid-in-capital, common stock 350,000

Total contributed capital 400,000

Retained earnings 250,000

Total shareholders' equity $650,000

The accounting department also conveys the following information:

  • Risk-free rate of return - 3%
  • Risk premium- 4.05%
  • Tax rate- 30%

Required: Compute Subtle Edge's weighted average cost of capital.

Reference no: EM132276527

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