the difference between a demand schedule and a demand curve is that the demand ____ presents information graphically or visually
1 answer:
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Answer:
a) 9.00 %
b) 7.80 %
c) yes the weight of the debt increases here is more risk in the investment as the debt payment are mandatory and failing to do so result in bankruptcy while the stock can wait to receive dividends if the income statement are good enough
d) 9.00 %
e) The increase in debt may lñead to an increase in return of the stockholders if they consider the stock riskier than before and will raise their return until the WACC equalize at the initial point beforethe trade-off occurs
Explanation:
a)
Ke 0.12
Equity weight 0.5
Kd(1-t) = after tax cost of debt = 0.06
Debt Weight = 0.5
WACC 9.00000%
c)
Ke 0.12
Equity weight 0.3
Kd(1-t) = after tax cost of debt = 0.06
Debt Weight 0.7
WACC 7.80000%
d)
<em>Ke 0.16</em>
Equity weight 0.3
Kd(1-t) = after tax cost of debt = 0.06
Debt Weight 0.7
WACC 9.00000%