Suppose that JB Cos. has a capital structure of 80 percent equity, 20 percent debt, and...

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Suppose that JB Cos. has a capital structure of 80 percent equity, 20 percent debt, and that its before-tax cost of debt is 1

Suppose that B2B, Inc. has a capital structure of 35 percent equity, 16 percent preferred stock, and 49 percent debt. Assume

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Answer 1

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1) After Tax cost of Debt Pretax cost of Debt*(1-Tax rate) 0.14*(1-0.21) 0.1106 11.06% weight Debt 0.20 0.80 Equity cost 0.11

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