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vodka [1.7K]
3 years ago
15

You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt. The cost of debt c

apital is 8 percent, while the cost of equity capital is 20 percent for the firm. What is the overall cost of capital for the firm?Entry field with correct answera. 12.2%b. 14.0%c. 15.8%d. 20.0%
Business
1 answer:
ExtremeBDS [4]3 years ago
8 0

Answer:

c. 15.8%

Explanation:

The cost of equity is the WACC (weighted average cost of equity)

WACC formula = wE*rE + wD*rD(1-tax) , whereby

wE = weight of equity = 65%

rE = cost of equity = 20%

wD = weight of debt=35%

rD(1-tax ) = after tax cost of debt =8%

WACC = (0.65 *0.20) + (0.35*0.08)

= 0.13 + 0.028

= 0.158 or 15.8%

Therefore, the overall cost of capital is 15.8%

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3 years ago
What percentage of businesses in America are home businesses?
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Answer:

c

Explanation:

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Jason is an employee at Manisch Burger and Meals. He is assigned the task of serving soft drinks to customers who order meals co
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C) Job specialization

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3 years ago
Why is it relevant that finance tends to attract large amounts of money? a. Money can be used for good or evil b. Finance attrac
SpyIntel [72]

Answer: c. Financial markets are a critical components of economic success

Explanation:

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3 years ago
What would be the amount of deposits D, given that the monetary base MB $750 billion, the required reserve rate (r) -0.1, the ex
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Answer:

$574.71 billion.

Explanation:

The formula for calculating amount of deposits is as follows:

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4 0
3 years ago
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