GS Co.’s capital structure consists entirely of long-term liabilities and common equity. The cost of capital for long-term liabilities is 3% while for common equity is 5%. The tax rate applicable is 30%. The weighted average cost of capital of GS Co. is 4.13%. What proportion of the company’s capital structure is funded by long-term liabilities?
GS Co.’s capital structure consists entirely of long-term liabilities and common equity. The cost of capital for long-term liabilities is 3% while for common equity is 5%. The tax rate applicable is 30%. The weighted average cost of capital of GS Co. is 4.13%. What proportion of the company’s capital structure is funded by long-term liabilities?
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 1P
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GS Co.’s capital structure consists entirely of long-term liabilities and common equity. The cost of capital for long-term liabilities is 3% while for common equity is 5%. The tax rate applicable is 30%. The weighted average cost of capital of GS Co. is 4.13%. What proportion of the company’s capital structure is funded by long-term liabilities?
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