Weighted average cost of capital

Reference no: EM131028162

Assume that ABC Corporation has the following capital structure: 30 percent debt, 10 percent preferred stock, and 60 percent equity. ABC Corporation wishes to maintain these proportions as it raises new funds. Its before-tax cost of debt is 8 percent, its cost of preferred stock is 10 percent, and its cost of equity is 15 percent. If the company's marginal tax rate is 40 percent, what is ABC's weighted average cost of capital?

Reference no: EM131028162

Questions Cloud

Implementation of technology - americas innovations : It is the same situation faced by the ancient Romans. Technology has made this country a world empire. One catalyst behind this evolution as a world power is the country's successful implementation of technology.

Cost the seller in the first place : A buyer just paid $50.98 for a calculator. If 29% of that amount was the seller's markup then what did the calculator cost the seller in the first place?

Which of these collections of subsets are partitions on sets : The set of bit strings that have 3k ones, where k is a non-negative integer; the set of bit strings that contain 3k+1 ones, where k is a non-negative integer; and the set of bit strings that contain 3k+2 ones, where k is a non-negative integer.

Importance of such personal mastery to a public leader : From the weekly readings and first e-Activity, take a position on whether personal mastery of the four (4) elements of emotional intelligence is possible, and ascertain the importance of such personal mastery to a public leader. Provide a rational..

Weighted average cost of capital : Its before-tax cost of debt is 8 percent, its cost of preferred stock is 10 percent, and its cost of equity is 15 percent. If the company's marginal tax rate is 40 percent, what is ABC's weighted average cost of capital?

Describe one sample point for this experiment : Assume that the "expert" really knows nothing about wine and randomly assigns ranks to the three wines. One of the wines is of much better quality than the others. What is the probability that the expert ranks the best wine no orse than second be..

How many bits does 10^100 have if written in base 2 : Find the number of all 20-digit integers in which NO two consecutive digits are the same

Accounting profits in making capital-budgeting decisions : Why do we focus on cash flows rather than accounting profits in making our capital-budgeting decisions? Why are we only interested in incremental cash flows rather than total cash flows? As a financial manager, explain why these concepts are impor..

List the sample points for the experiment : Patients arriving at a hospital outpatient clinic can select one of three stations for service. Suppose that physicians are assigned randomly to the stations and that the patients therefore have no station preference. Three patients arrive at the ..

User Account

All Pages