Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $1 comma 713 from Wendy, who will charge him 4% on the loan. He will also borrow $1 comma 429 from Bebe, who will charge him 6% on the loan, and $858 from Shelly, who will charge him 12% on the loan. What is the weighted average cost of capital for Eric? What is the weighted average cost of capital for Eric?
= %
(Round to two decimal places.)
Weighted average cost of capital = Cost of Capital from one source*Weight of one source + Cost of capital of second source*Weight of Second source + Cost of capital of third source*Weight of third source
= 4%*1713/(1713+1429+858) + 6%*1429/4000 + 12%*858/4000
= 6.4305%
i.e. 6.43%
Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding...
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