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3 years ago

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Your firm uses half debt and half equity. The shareholders need to earn 20%. The firm can borrow at 5%. The risk free rate is 2%

. The tax rate is 40%. Find the weighted average cost of capital.

1 answer:

IgorLugansk [536]3 years ago

7 0

Answer:

11.5%

Explanation:

WACC = weight of equity x cost of equity + weight of debt x cost of debt x (1 - tax rate)

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Read 2 more answers

You have borrowed $28,000 at an interest rate of 12% compounded annually. Equal payments will be made over a four-year period, w

Sloan [31]

Answer:

$A = 28000 [\frac{0.12 (1.12)^4}{(1.12)^4 -1}]$

$A = 28000 [\frac{0.12*1.574}{1.574-1}]$

$A=28000*0.3292 = 9218.564$

So then the annual pay would be $ 9218.564 for this case

Explanation:

For this question we can use the Equivalent annual value (A) given by the following expression:

$A = PV [\frac{i (1+i)^t}{(1+i)^t -1}]$

Where $PV = 28000$ represent the pesent value

$i = 0.12$ since the rate is yearly

$t = 4$ since we have 4 years to pay

So then we have everything to replace and we got:

$A = 28000 [\frac{0.12 (1.12)^4}{(1.12)^4 -1}]$

$A = 28000 [\frac{0.12*1.574}{1.574-1}]$

$A=28000*0.3292 = 9218.564$

So then the annual pay would be $ 9218.564 for this case

And this amount would be paid each year in order to pay all the money after 4 years.

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3 years ago