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Cooking for friends to raise capital for the company

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1. Finding the WACC. Monica is the CFO of Cooking for Friends (CFF) and uses the pecking order hypothesis philosophy when she raises capital for company projects. Currently, she can borrow up to $600,000 from her bank at a rate of 8.5%, float a bond for $1,100,000 at a rate of 9.25%, or issue additional stock for $1,300,000 at a cost of 17%. What is the WACC for CFF if Monica chooses to invest

  • a. $1,000,000 in new projects?
  • b. $2,000,000 in new projects?
  • c. $3,000,000 in new projects?

2. Finding the WACC. Chandler has been hired by Cooking for Friends to raise capital for the company. Chandler increases the funding available from the bank to $900,000, but with a new rate of 8.75%. Using the data in Problem 9, determine what the new WACC is for borrowing $1,000,000, $2,000,000, and $3,000,000.

Reference no: EM131473096

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