I had asked this question previously but the answer was incorrect from what my professor had put on the answer key and the explanation was confusing again, so I have to decided to repost the question with the answer options and the answer that is listed to be correct. the backwoods lumber co. has a debt equity ratio of .80. the firm's required return on assets is 12% and its cost of equity is 15.68% what is the pre tax cost of debt based on M&M II with no taxes? a. 6.76% b. 7.00% c. 7.25% d. 7.40% (marked correct on the answer key given) e. 7.50%
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
I had asked this question previously but the answer was incorrect from what my professor had put on the answer key and the explanation was confusing again, so I have to decided to repost the question with the answer options and the answer that is listed to be correct.
the backwoods lumber co. has a debt equity ratio of .80. the firm's required
a. 6.76%
b. 7.00%
c. 7.25%
d. 7.40% (marked correct on the answer key given)
e. 7.50%
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