Almond, Inc has determined the cost of each of its sources of capital and the desired weighting in the capital structure. See below. What is its weighted average cost of capital? Source of capital Weight After‑tax cost ______________________________________________________ Long‑term debt 40% 7% Preferred stock 10 13 Common stock equity 50 15 And if Almond Inc. pays 11.6% interest on its outstanding bonds. If its tax rate is 40%, what is its after-tax cost of debt?

Almond, Inc has determined the cost of each of its sources of capital and the desired weighting in the capital structure. See below. What is its weighted average cost of capital? Source of capital Weight After‑tax cost ______________________________________________________ Long‑term debt 40% 7% Preferred stock 10 13 Common stock equity 50 15 And if Almond Inc. pays 11.6% interest on its outstanding bonds. If its tax rate is 40%, what is its after-tax cost of debt?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 5P

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