WACC = weight of debt * after tax cost of debt + weight of equity * cost of equity + weight of preferred stock * cost of preferred stock
= (1000000/2000000) * 6% * (1-0.4) + (100000/2000000) *10% + (900000/2000000) * 13%
= 8.15%
hence choose C)
Tax bracket is 40%, BTka = 6%, kp = 10%, and k, = 13% Total assets...
The effect of tax rate on WACC K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 20% debt, 20% preferred stock, and 60% common stock. The cost of financing with retained earnings is 17%, the cost of preferred stock financing is 9%, and the before-tax cost of debt financing is 9%. Calculate the weighted average cost of capital...
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QUESTION 41 CGI Co. has a desired capital structure of 10-40-50 (preferred shares, debt, and ordinary shares, respectively). The tax rate shifted from 24% to 32%. Other information: Before-tax cost of preferred stock: 8% Before-tax cost of common stock: 14% Before-tax cost debt: 6% What is the new WACC of CGI Inc.? a. 9.33% b. 9.43% c. 10.2%
P9-12 (similar to) E Question Help The effect of tax rate on WACC K Bell Jewelers wishes to explore the efflect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital financing is 12%, and the before tax cost of debt finacing is 6% Calculate the weighted average cost of capital MACC) g en a tax rate of 25% 40 % debt 15% preferred stock, and 45% common stock...
P9-12 (book/static) Question Help The effect of tax rate on WACC K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a cap al structure o 40% deb 10% preferred stock, and 50% common stock The cost of fran with reta ned earnings ıs 10%, the cost of preferred stock financing is 8%, and the before-tax cost of debt financing is 6% Calculate...
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7. Consider the following information about a company: total assets - $10 million; total asset turnover = 15; gross profit margin = 1/2; operating expenses = 1/2 of cost of goods sold; net fixed assets fixed assets; interest coverage ratio = 5 times; net profit margin = 1/10; common shares = 200,000. (a) Construct the income statement from the information provided. Total Asset : 10,000,000 1,000,000 Total Asset Turnover - 2,000,000 +2,000,000 Gross profit margin:5,000,000 +2,000,000 Operating...
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