Computing The Weighted Average Cost of Capital
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The following is on a balance sheet
Current Asset: $3,600
Fixed Asset: $6,400
Total Assets: $10,000
Debt: $5200
Preferred Stock: $600
Common equity $4200
Total liabilities and equity: $10,000
The market value of debt, preferred stock, and common equity equals its book value. Cost of debt is 8.0%, it cost of preferred stock is 7.7% and its cost of common equity is 16.3% . Tax rate is 40% what is the WACC?
Options (choose one)
A. 9.80
B. 10.43
C. 9.65
D 10.95
E 10.23
If possible please provide spread sheet
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Solution Summary
Using an Excel 97-2003 file, given a company's balance sheet, tax rate and costs of equity and debt, it demonstrates how to compute the weighted-average cost of capital.
Solution Preview
The after-tax cost of debt=cost of debt*(1-tax rate). In this case, the cost of debt is .08*(1-.40), or 4.80 percent.
Type Cost Market Value Percentage ...
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