rate positively ..
Amount of investment | 3 | ||||||
equity= | 1.65 | ||||||
Debt= | 1.35 | ||||||
equity from retained earning = | 1 | ||||||
New equity to be raised = | 0.65 | ||||||
Debt to be raised = | 1.35 | ||||||
Post tax cost of debt = 11%*(1-40%) | 6.600% | ||||||
Computation of WACC | |||||||
Source | Amt | weight | Cost of capital | weight * cost | |||
Debt | 1.35 | 45.00% | 6.60% | 2.97% | |||
Retained earning | 1 | 33.33% | 13.00% | 4.33% | |||
new equity | 0.65 | 21.67% | 16.00% | 3.47% | |||
Total | 3 | 10.77% | |||||
Answer = | 10.77% | ||||||
10-2: Basic Definitions WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 55%...
10-2: Basic Definitions WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs = 15%. New common stock in an amount up to $10 million would have a cost of re = 19%. Furthermore, Klose can raise up to $4 million of...
10-2: Basic Definitions WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs-1590. New common stock in an amount up to $9 million would have a cost of re-1796. Furthermore, Klose can raise up to $3 million of debt at an interest...
10-2: Basic Definitions WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $2 millior of retained earnings with a cost of rs 15%. New common stock in an amour to $9 million would have a cost of re-: 17%. Furthermore, Klose can raise up to $3 million of debt at an...
Klose Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs = 14%. New common stock in an amount up to $9 million would have a cost of re = 17%. Furthermore, Klose can raise up to $3 million of debt at an interest...
Klose Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs = 14%. New common stock in an amount up to $9 million would have a cost of re = 17%. Furthermore, Klose can raise up to $3 million of debt at an interest...
WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of r's = 15%. New common stock in an amount up to $7 million would have a cost of re = 19%. Furthermore, Olsen can raise up to $3 million of debt at an...
Olsen Outfitters Inc, believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 11%. New common stock in an amount up to $10 million would have a cost of re-13.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $7 million would have a cost of re = 14.5%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of r's = 15%. New common stock in an amount up to $7 million would have a cost of re = 19%. Furthermore, Olsen can raise up to $3 million of debt at an...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 10%. New common stock in an amount up to $9 million would have a cost of re = 13.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest...