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Weighted Average Cost of Capital at Combinations of Debt/Equity

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A firm's current balance sheet is as follows:

Assets
$100

Debt
$10

Equity
$90

What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information?

Debt/Assets After-Tax Cost of Debt Cost of Equity Cost of Capital
0% 8% 12% ?
10 8 12 ?
20 8 12 ?
30 8 13 ?
40 9 14 ?
50 10 15 ?
60 12 16 ?

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https://brainmass.com/business/weighted-average-cost-of-capital/weighted-average-cost-capital-combinations-debt-equity-381855

Solution Preview

The term capital structure is used to represent the proportionate relationship between debt and shares. The various means ...

Solution Summary

The solution discusses what the WACC is at various combinations of debt and equity.

$2.19