Weighted-average cost of capital, Financial Management

Assignment Help:

A Company has the following capital structure:

Debt: $2,000,000
Preferred: $1,000,000
Common: $4,000,000
Retained Earnings: $3,000,000

The amounts shown gives book values. The market values and the after-tax cost of the components are as follows;

Debt: $1,800,000            .06
Preferred: $700,000       .11
Common: $12,500,000   .15

Determine the weighted-average cost of capital.

(b) Explain and Describe the two methods of calculating the cost of equity

Related Discussions:- Weighted-average cost of capital

State the rate of return of a bond - debt securities, Rate of return of a B...

Rate of return of a Bond In case of bonds, rather than dividends, investor is entitled to payments of interest yearly or semi-annually. Investor also benefits if there is an ap

Explain rate of the stock turnover, Q. Explain Rate of the stock turnover? ...

Q. Explain Rate of the stock turnover? Rate of the stock turnover: this is high degree of the inverse co relation between the quantum of the working capital requirement and the

None, Reacher Technology has consulted with investment bankers and determin...

Reacher Technology has consulted with investment bankers and determined the intere Reacher Technology has consulted with investment bankers and determined the interest rate it woul

Financial system, Financial System: The economic development of a natio...

Financial System: The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and hous

Immunization, In 1952, to provide equilibrium between assets and liab...

In 1952, to provide equilibrium between assets and liabilities of insurance companies, Frank Redington, an English actuary, proposed interest rate immunization te

Explain sunk cost and opportunity cost in npv, In the NPV analysis, sunk co...

In the NPV analysis, sunk cost is not relevant whereas opportunity cost is for project evaluation. Requirements: Explain and justify the above statement about sunk cost and

Rating methodologies of a debt instrument, The key parameters t...

The key parameters taken into account while rating a debt instrument are as follows: 1. Industry Evaluation - This involves an evaluation of the

Treasury coupon securities and bills, Many practitioners feel that in...

Many practitioners feel that instead of using only on-the-run issues, all treasury coupon securities and bills are to be used for constructing the theoretical spo

Cost of capital, Q. Cost of capital? The terms of cost of capital refer...

Q. Cost of capital? The terms of cost of capital refers to the minimum rate of the return a firm must earn on its investment so that the market value of the company equity shar

Illustrate methods to manage cash resources, Q. Illustrate Methods to Manag...

Q. Illustrate Methods to Manage cash resources? There are several methods which may be of use in managing resources. The particular tool selected will depend on its reliability

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages