Imagine you are the cfo of ibm you have been successful

Reference no: EM13381265

Imagine you are the CFO of IBM. You have been successful over the years, but are now concerned about how many sources of funds you have, and the cost of those funds. With changing business conditions, you really want to keep these costs down.

At IBM, you have issued $100,000,000 in Corporate Bonds that carry a 6% interest rate, $200,000,000 in Equity that offers a 10% dividend, and $100,000,000 in Retained Earnings that has an opportunity cost of 9%.

a. What is your weighted average cost of capital? (Calculate, and show the work)

b. What could this business do to bring this cost down? Discuss, using specific examples.

c. Why is knowing WACC important for a business?

Reference no: EM13381265

Questions Cloud

Question from gapenskis fundamentals of health care : question from gapenskis fundamentals of health care finance.assume that the managers of fort winston hospital are

Personal financial managementparta1describe the major : personal financial managementparta1.describe the major components of a personal financial plan.2.why are there

Imagine that for the second quarter in a row profits are : imagine that for the second quarter in a row profits are down at waterfall division. division management budgeted

Sailcloth amp more currently produces boat sails and is : sailcloth amp more currently produces boat sails and is considering expanding its operations to include awnings for

Imagine you are the cfo of ibm you have been successful : imagine you are the cfo of ibm. you have been successful over the years but are now concerned about how many sources of

1prepare cash flow statements for 2007 - 2009 explain : 1prepare cash flow statements for 2007 - 2009. explain balance sheet changes and assess the companys generation and use

Suppose that microsoft is considering changing its capital : suppose that microsoft is considering changing its capital structure in light of the tough business environment.

Questionbelow is abc shippings source of capital : questionbelow is abc shippings source of capital structuresource of capitalmarket valuecostlong-tenn debts

Question a what is the operating cycle of a business how : question a what is the operating cycle of a business? how does it vary for different types of business? why is it

User Account

All Pages