Find the firm present weighted average cost of capital

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The Manx Company was recently formed to manufacture a new product. It has the following capital structure in market value terms:

Debentures           $ 6,000,000

Preferred stock        2,000,000

Common stock       8,000,000

                        $16,000,000

Question 1: The company has a marginal tax rate of 40 percent. A study of publicly held companies in this line of business suggests that the required return on equity is about 17 percent. The Manx Company's debt is currently yielding 13 percent, and its preferred stock isyielding 12 percent. Compute the firm's present weighted average cost of capital?

 

Reference no: EM132566435

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