Homework Answers
Answer 11:
Given Capital Structure:
Debt = 60%
Equity = 40%
Tax rate = 0%
Weighted cost of capital = Cost of equity * Weight of Equity + Cost of debt * Weight of debt = 4% * 40% + 6% * 60% = 5.20%
Weighted cost of capital = 5.20%
Answer 12:
Dollar amount of interest that should be included in ownership costs = 150000 * 6% = $9,000
Dollar amount of interest that should be included in ownership costs = $9,000
Answer 13:
Dollar amount of depreciation to be included in ownership costs = Combined value * 10%
= $250,000 * 10%
= $25,000
Dollar amount of depreciation to be included in ownership costs = $25,000
Answer 14:
Dollar amount of tax and insurance to be included in ownership costs = Combined value * 1%
= $250,000 * 1%
= $2,500
Dollar amount of tax and insurance to be included in ownership costs = $2,500
Answer 15:
Total estimated ownership cost of current year = Interest + Depreciation + Tax and Insurance
= 9000 + 25000 + 2500
=$36,500
Total estimated ownership cost of current year = $36,500
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