Company ABC's book value of capital is as follows: Debt $700,000; Pref Stock $120,000; Common Stock $252,000. The market value of Company ABC's capital is: Debt $700,000; Pref Stock $225,000; Common Stock $650,000. Company ABC's after-tax cost of debt is 4.6%, preferred stock has required return of 6.5% and common stock has a required return of 11.6%. What is ABC's weighted average cost of capital? O 7.8% It can not be determined without knowing the tax rate 10.0% 7.6%
Company ABC's book value of capital is as follows: Debt $700,000; Pref Stock $120,000; Common Stock $252,000. The market value of Company ABC's capital is: Debt $700,000; Pref Stock $225,000; Common Stock $650,000. Company ABC's after-tax cost of debt is 4.6%, preferred stock has required return of 6.5% and common stock has a required return of 11.6%. What is ABC's weighted average cost of capital? O 7.8% It can not be determined without knowing the tax rate 10.0% 7.6%
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 15PROB
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Bhupatbhai
Transcribed Image Text:Company ABC's book value of capital is as follows: Debt $700,000; Pref Stock $120,000;
Common Stock $252,000. The market value of Company ABC's capital is: Debt $700,000;
Pref Stock $225,000; Common Stock $650,000. Company ABC's after-tax cost of debt is
4.6%, preferred stock has required return of 6.5% and common stock has a required return
of 11.6%. What is ABC's weighted average cost of capital?
O 7.8%
It can not be determined without knowing the tax rate
10.0%
7.6%
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