Homework Answers
rate positively .. let me know if you need any clarification..
| Ans a | i | ii | iii=i*ii | ||
| weight | cost | Weighted cost | |||
| Debt | 25% | 7% | 1.75% | ||
| common equity | 75% | 14% | 10.50% | ||
| weighted average cost of capital | 12.25% | ||||
| Ans b | |||||
| i | ii | iii=i*ii | |||
| weight | cost | Weighted cost | |||
| Debt | 50% | 8% | 4.00% | ||
| common equity | 50% | 16% | 8.00% | ||
| weighted average cost of capital | 12.00% | ||||
| Ans c | Firm should selecte plan B because it has lower cost of capital |
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