What is the weighted average cost of capital

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Question 1 - What is the weighted average cost of capital for a corporation that finances an expansion project using 40% retained earnings and 60% venture capital? Assume the interest rates are 10% for equity financing and 16% for debt financing.

Question 2 - Your boss, whose background is in financial planning, is concerned about the company's high-weighted average cost of capital of 21%. He has asked you to determine what combination of debt-equity financing would lower the company's WACC to 13%. If the cost of the company's equity capital is 6% and the cost of debt financing is 28%, what debt-equity mix would you recommend?

Reference no: EM133044326

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