The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises? a.13.8% b.15.1% c.16.2% d.14.4%

The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises? a.13.8% b.15.1% c.16.2% d.14.4%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 14MC: The capital structure of Ridley Enterprises Is: Debt 40%, Equity 60%. The cost of debt is 13%, and...

See similar textbooks

Related questions

Q: Assume a company has 10 million of total assets: the market value of equity is 8 million and market…

A: The Weighted Average Cost of Capital(WACC) refers to the financial ratio that provides the overall…

Q: Design Interiors has a cost of equity of 14.9 percent and a pretax cost of debt of 8.6 percent. The…

A: Here, Cost of equity = 14.9% Pretax cost of debt = 8.6% Weighted average cost of capital of the firm…

Q: Blue Co. has a debt to equity ratio of 25%. The company is funded by debt and common equity. The…

A: WACC weighted average cost of capital is the weight of equity multiply by cost of equity plus weight…

Q: The company’s capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common…

A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…

Q: Accounting B Ltd has total assets of $9 million, EBIT of $1,700,000, preference dividends of…

A: Formula: Earnings per share= earnings available for common stock holders/number of common stock.…

Q: Calculate the weighted average cost of capital (WACC) of company ABC Inc., if: I. The company’s…

A: In the context of the given question, we are required to compute the weighted average cost of…

Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…

A: Earnings before interest and taxes: Earnings before interest, depreciation and taxes are the…

Q: ADM Pty Ltd has Total Assets of R850 000. Debt ratio for the firm is 80% of which 70% is long term…

A: equity value = (1 - debt ratio)*total assets = (1 - 0.8) * 850,000 = 170,000 net income = asset…

Q: A company has determined that its optimal capital structure consists of 40 percent debt and 60…

A: rd before Tax = 8% , Tax = 40% After tax cost of debt = rd*(1-Tax rate)…

Q: Lawn Care, Inc., has sales of $367,400, costs of $183,600, depreciation of $48,600, interest of…

A: Return on equity measures the return generated by common or equity shareholders from their…

Q: Ohio Quarry Inc. has $10 million in assets. Its expected operating income (EBIT) is $4 million and…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Weekend Warriors, Inc., has 45%debt and 55% equity in its capital structure. The firm's…

A: WACC (weighted average cost of capital) refers to the average cost that is paid by a company to…

Q: Petra plc. has a current and target leverage ratio of 0.8, the finance cost from loans is 16 per…

A: Weighted cost of capital: It can be defined as the rate that is paid by the company on the average…

Q: compute the weighted average cost of capital.

A: Debt to Equity Ratio of 1 implies that Debt Ratio = 1/2 = 0.5 Equity Ratio = 1/2 = 0.5 Cost of Debt…

Q: ABC Company’s cost of equity is 18%, its before-tax cost of debt is 8%, and its corporate tax rate…

A: Cost of Equity = 18% Before Tax Cost of Debt = 8% Tax Rate = 40% Value of Equity = 1200 Value of…

Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…

A: Net operating profit = P300,000 Before tax cost of debt (Kd) = 0.06 Cost of equity (Ke) = 0.15…

Q: Key Motors has a cost of equity of 14.26 percent and an unlevered cost of capital of 11.34 percent.…

A: levered cost of equity formula: re=ru+DV-D×ru -rd×1-taxwhere,re= levered cost of equityru= unlevered…

Q: The Bigelow Company has a cost of equity of 12 percent, a pre-tax cost of debt of 7 percent, and a…

A: WACC (weighted average cost of capital) refers to the average cost that is paid by a company to…

Q: Company X has debt and equity as sources of funds. Company X has market value of debt as $150,000…

A: Weighted Average Cost of Capital is the firm’s cost of capital in each category of capital is…

Q: The company's capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common…

A: Cost of capital is the sum of cost of capital from all the sources of finance. Weighted average cost…

Q: Company A is financed by 20% of debt and the rest of the company is financed by common equity. The…

A: Given: Debt (% of capital structure) 20% Before-tax cost of debt 5% Cost of equity 11%…

Q: A firm’s after-tax cost of debt is 6% and cost of equity is 9%. The firm’s investment in an asset is…

A: WACC = (Weight of debt * cost of debt) + (Weight of equity * Cost of equity)

Q: Black Inc.'s capital structure consists entirely of long-term debt and common equity. The cost of…

A: Cost of long term debt = 5% Tax rate = 40% After tax cost of debt (RD) = 5%*(1-0.40)…

Q: Take It All Away has a cost of equity of 10.57 percent, a pretax cost of debt of 5.29 percent, and a…

A: A company has several sources from where it can raise funds. It can issue equity shares and the…

Q: Paranto company has the following Capital structure: 50% equity, 30% debt; and 20% preferred stock.…

A: Weighted average cost of capital(WACC) is the average cost of capital calculated by multiplying the…

Q: Bulldogs Inc.’s capital structure consists entirely of long-term debt and common equity. The cost of…

A: Weighted average cost of capital is the average of the various cost of capital based on the weights…

Q: You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35…

A: Weight of equity= 65% Weight of debt= 35% Cost of equity= 20% Cost of debt=8%

Q: at is the weighted average cost of capital (WACC) for ABC Limited which has the following capital…

A: Weighted average cost of capital is weighted cost of equity and weighted cost of debt that is hurdle…

Q: A company's capital structure weights are 75% equity and 25% debt. The company's cost of equity is…

A: In the given question we require to compute the firm's WACC from the below given details: Weight of…

Q: Weighted average cost of capital) The target capital structure for Jowers Manufacturing is 50…

A: Calculation of Weighted Average Cost of Capital:The weighted average cost of capital is…

Q: Take It All Away has a cost of equity of 11.05 percent, a pretax cost of debt of 5.40 percent, and a…

Q: Tee Corp. has a total long term capital of $980,000; of which 400,000 is long-term debt, $80,000 is…

A: common equity = $980,000 - $80,000 - $400,000 common equity= 500,000

Q: Jack Corp. has a profit margin of 10.70 percent, total asset turnover of 1.46, and ROE of 18.63…

A: Profit margin ratio (PMR) is the ratio of net profit (NP) to Total revenue (TR). PMR = NP/TR Total…

Q: what is the weighted average cost of capital?

A: Information Provided: Cost of equity = 12.8% YTM on bonds = 5.3% Tax rate = 35% Debt-Equity ratio =…

Q: Marina Supplies has 40% debt and 60% equity in its capital structure. The firm's estimated after-tax…

A: Weighted Average Cost of Capital is the propionate cost of capital of equity and debt. The…

Q: The ABC Company has a cost of equity of 21.2 percent, a pre-tax cost of debt of 5.2 percent, and a…

A: wacc=wd×rd×1-tax+we×rewhere,wd=weight of debtrd=cost of debtwe=weight of equityre=cost of equity

Q: Weekend Warriors, Inc., has 45% debt and 55% equity in its capital structure. The firm's estimated…

A: WACC is the total cost of capital structure, calculated by weighted average of cost of each…

Q: XYZ. Ltd. current operating income is ₹20 lakhs. The firm has ₹20 lakhs of 20 percent debt…

A: The cost of equity refers to the expected return a company needs to decide when an investment meets…

Q: Weekend Warriors, Inc., has 40% debt and 60% equity in its capital structure. The firm's…

A: Weighted average cost of capital is weighted average cost of individual security

Q: A company has determined that its optimal capital structure consists of 40 percent debt and 60…

A: Weight of debt (Wd) = 40% Weight of equity (We) = 60% Cost of debt (Rd) = 7% Let the cost of equity…

Q: The firm's cost of debt is 9 percent, and the cost of retained earnings is 15 percent. However, if…

A: Cost of capital : Cost of capital includes both after tax cost of debt and cost of equity as per…

Question

The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises?

a.13.8%

b.15.1%

c.16.2%

d.14.4%

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Calculating the required part.

VIEW

Step 3 Conclusion

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Assume Skyler Industries has debt of $4,500,000 with a cost of capital of 7.5% and equity of $5,500,000 with a cost of capital of 10.5%. What is Skylers weighted average cost of capital?
The capital structure of Ridley Enterprises Is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises? A. 14.4% B. 15.1% C. 16.2% D. 13.8%
ABC company has a capital structure of $7.1 million and it is made up of $5.6 million in equity and $1.5 million in debt. E = $5,600,000 D = $1,500,000 Tax Rate (T) = 21% Cost of debt = .06 Cost of Equity = .09 Use the information given above and calculate the Weighted Average Cost of Capital.
KN Stitches has debt of $26,000, a leveraged value of $78,400, a pretax cost of debt of 7.05 percent, a cost of equity of 15.3 percent, and a tax rate of 21 percent. What is the weighted average cost of capital?
The company’s capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common equity Weight 50%. The cost of debt is 12%, the cost of preferred stock is 15% and the cost of common equity is 0.244. Calculate the company’s weighted average cost of capital.
Fama's Llamas has a weighted average cost of capital of 9.7 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.4 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio?
Assume a company has 10 million of total assets: the market value of equity is 8 million and market value of debt is 2 million. The company has a 12% cost of equity and a 7% cost of debt. The company has a tax rate of 30%. What is the company’s weighted average cost of capital?
Weekend Warriors, Inc., has 40% debt and 60% equity in its capital structure. The firm's estimated after-tax cost of debt is 6% and its estimated cost of equity is 15%. Determine the firm's weighted average cost of capital (WACC). Weekend Warriors' weighted average cost of capital (WACC) is _____%
A business has a cost of equity of 9.5 percent and a pretax cost of debt of 5.4 percent. The debt - equity ratio is 1.55 and the tax rate is 25 percent. What is the unlevered cost of capital?
P&G has the following capital structure: $2 million in debt, $5 million in preferred stock and $7 million in equity. If the company’s before-tax cost of debt is 6%, cost of preferred stock is 9% and cost of equity is 15%, what is weighted average cost of capital (in %) for P&G? Assume that P&G’s tax rate is 30%. WACC = ____________%
Keziah Textiles, Inc. has a cost of equity of 10.8 percent. The company has an aftertax cost of debt of 5.1 percent, and the tax rate is 35 percent. If the company's debt–equity ratio is .80, what is the weighted average cost of capital?
Percy's Wholesale Supply has earnings before interest and taxes of €106,000. Both the book and the market value of debt is €170,000. The unlevered cost of equity is 15.5 per cent while the pre-tax cost of debt is 8.6 per cent. The tax rate is 28 per cent. What is the firm's weighted average cost of capital? Show your steps.