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Charra [1.4K]
2 years ago
11

The unlevered cost of capital is: Group of answer choices the cost of preferred stock for a firm with equal parts debt and equit

y in its capital structure. equal to the profit margin of a firm with some debt in its capital structure. the cost of capital for a firm with no debt in its capital structure. the cost of capital for a firm with no equity in its capital structure. the interest tax shield times earnings before taxes.
Business
1 answer:
Dennis_Churaev [7]2 years ago
5 0

Answer: The cost of capital for a firm with no debt in its capital structure.

Explanation:

Leverage in finance refers to the use of debt. Unlevered capital therefore would refer to capital that is without debt which means that an unlevered cost of capital is one with no debt in its capital structure.

Companies with such a capital structure derive their capital 100% from Equity and as such do not pay interest. This means however, that they will not benefit from the tax shields that interest payments offer.

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Total $1,091.0030

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<u>Then, for the present value at maturity, we calculate the present value of a lump sum</u>

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   1,000.00

time   21.00

rate  0.036

\frac{1000}{(1 + 0.036)^{21} } = PV  

PV   475.82

<u>Finally, we add them both together</u>

PV c $615.1803

PV m  $475.8227

Total $1,091.0030

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