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A firm has a cost of debt of 6.2 percent and a cost of equity of 13.3 percent. The debt–equity ratio is .96. There are no taxes. What is the firm's weighted average cost of capital?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 7EA: Assume Skyler Industries has debt of $4,500,000 with a cost of capital of 7.5% and equity of...

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Question

A firm has a cost of debt of 6.2 percent and a cost of equity of 13.3 percent. The debt–equity ratio is .96. There are no taxes. What is the firm's weighted average cost of capital?

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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