ZuoTi.Pro
Question

Weekend Warriors, Inc., has 30% debt and 70% equity in its capital structure. The firms estimated after-tax cost of debt is

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Weight of Equity = 0.7
Weight of Debt = 0.3
Cost of Capital = Weight of Equity*Cost of Equity+Weight of Debt*Cost of Debt
Cost of Capital = 12*0.7+9*0.3
Cost of Capital = 11.1
0 0
Add a comment
Know the answer?
Add Answer to:
Weekend Warriors, Inc., has 30% debt and 70% equity in its capital structure. The firm's estimated...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Suppose that TapDance, Inc.’s, capital structure features 70 percent equity, 30 percent debt, and that its...

    Suppose that TapDance, Inc.’s, capital structure features 70 percent equity, 30 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. Assume the appropriate weighted average tax rate is 34 percent. What will be TapDance’s WACC? (Round your answer to 2 decimal places.)

  • Suppose that TapDance, Inc.'s, capital structure features 70 percent equity, 30 percent debt, and that its...

    Suppose that TapDance, Inc.'s, capital structure features 70 percent equity, 30 percent debt, and that its before-tax cost of debt is 10 percent, while its cost of equity is 15 percent. Assume the appropriate weighted average tax rate is 34 percent What will be TapDance's WACC? (Round your answer to 2 decimal places.)

  • U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current...

    U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 8%, and its tax rate is 35%. It currently has a levered beta of 1.15. The risk-free rate is 3.5%, and the risk premium on the market is 7.5%. U.S. Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its before-tax cost of debt to increase...

  • Kahn Inc. has a target capital structure of 70% common equity and 30% debt to fund...

    Kahn Inc. has a target capital structure of 70% common equity and 30% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 8%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $35. What is the company's expected growth...

  • The firm's target capital structure is the mix of debt, preferred stock, and common equity the...

    The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the firm's WACC calculation. However, if...

  • Dickson, Inc., has a debt-equity ratio of 2.4. The firm's weighted average cost of capital is...

    Dickson, Inc., has a debt-equity ratio of 2.4. The firm's weighted average cost of capital is 9 percent and its pretax cost of debt is 7 percent. The tax rate is 25 percent. a. What is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer...

  • The firm's target capital structure is the mix of debt, preferred stock, and common equity the...

    The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the firm's WACC calculation. However, if...

  • Kahn Inc. has a target capital structure of 70% common equity and 30% debt to fund its $11 billion in operating assets

    Kahn Inc. has a target capital structure of 70% common equity and 30% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 9%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $35. a. What is the company's expected growth...

  • Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's...

    Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's debt currently has an 9% yield to maturity. The risk-free rate (rRF) is 6%, and the market risk premium (rM - rRF) is 6%. Using the CAPM, Forever estimates that its cost of equity is currently 11%. The company has a 40% tax rate. Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead...

  • 1.A firm has a capital structure that is 30% Debt, and 70% equity. Its YTM on...

    1.A firm has a capital structure that is 30% Debt, and 70% equity. Its YTM on current bonds is 9%, and its tax rate is 25%. If the WACC is 10.5%, what is the cost of equity? 2.A firm has a 30% tax rate, and a 3% cost to issue new common stock. It has determined the optimal capital structure as shown in the table below. What is the firm's cost of capital? Type of Capital Capital Structure Cost of...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT