Weighted Average Cost of Capital
Not what you're looking for?
Please give all calculations and show the work so I can learn how it's done.
The ABC Co is in the process of determining a return rate to use or its cost of capital. Upon review of the financial statements it was determined that the total interest bearing debt is $1,400,000 and total stockholders' equity is $1,000,000. In addition, it was determined that the cost of debt financing is 8%, and thre cost of equity financing is
18%.
a. What proportion of the ABC co's total financing comes from debt? (Show calculations please)
b. What proportion of the ABC co's total financing comes from equity?
c.Calculate the ABC's weighted average cost of captial rate.
Please show all calculations. Thanks
Purchase this Solution
Solution Summary
The solution explains how to calculate the proportions of the capital components and use these to determine the weighted average cost of capital
Solution Preview
a. What proportion of the ABC co's total financing comes from debt? (Show calculations please)
The proportion is calculated as component amount/total capital. For debt the component amount of debt is 1,400,000 and the total capital ...
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Lean your Process
This quiz will help you understand the basic concepts of Lean.