% weight Capital raised No. of shares/Bonds issued Dividend/ Interest in 1st year Effective cost after tax savings Common stock 40% 2,00,000 20,000 30,000 30,000 Debt 40% 2,00,000 200 12,000 8,400 Preferred stock 20% 1,00,000 10,000 20,000 20,000 5,00,000 62,000 58,400 Capital raised accordingly for the company would be $ 62,000. The retained earnings of the company is $ 2,50,000 w
% weight Capital raised No. of shares/Bonds issued Dividend/ Interest in 1st year Effective cost after tax savings Common stock 40% 2,00,000 20,000 30,000 30,000 Debt 40% 2,00,000 200 12,000 8,400 Preferred stock 20% 1,00,000 10,000 20,000 20,000 5,00,000 62,000 58,400 Capital raised accordingly for the company would be $ 62,000. The retained earnings of the company is $ 2,50,000 w
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.2.2MBA
Related questions
Question
|
Particulars |
% weight |
Capital raised |
No. of shares/Bonds issued |
Dividend/ Interest in 1st year |
Effective cost after tax savings |
|
Common stock |
40% |
2,00,000 |
20,000 |
30,000 |
30,000 |
|
Debt |
40% |
2,00,000 |
200 |
12,000 |
8,400 |
|
|
20% |
1,00,000 |
10,000 |
20,000 |
20,000 |
|
|
|
5,00,000 |
|
62,000 |
58,400 |
Capital raised accordingly for the company would be $ 62,000.
The
The tax effective cost of capital will be $ 58,400 using taxes at @30%
- Determine the company WACC.
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