Answer:
The accounting costs during the first year of operation is $145,000
Explanation:
Accounting cost: It is that cost which represents expenditure for a particular year.
In this question, the accounting cost would be annual overhead costs and operating expenses. So, it would be $145,000
All other costs which are mentioned in the question are irrelevant. Thus, ignored the other things because they are used to compute the implicit and the opportunity cost
The calculation of the Weighted Average Cost of Capital ( WAAC ) can be done using the following formula:
Weighted Average Cost of Capital = (Cost of debt * Weight of debt) + (Cost of Preferred* Weight of Preferred) +( Cost of equity * weight of equity)
Following information is available:
Cost of debt = 6%
Weight of debt = 40%
Cost of Preferred = 7.50%
Weight of Preferred = 15%
Cost of equity or retained earnings = 12%
Weight of equity = 45%
Hence, Weighted Average Cost of Capital = (6%*40%) + (7.5%*15%) + (12%*45%) = 8.925%
Hence, Weighted Average Cost of Capital is <u>8.925%
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