Evans Technology has the following capital structure. Debt Common equity 40% 60 The aftertax cost of...

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Evans Technology has the following capital structure. Debt Common equity 40% 60 The aftertax cost of debt is 9.00 percent, and the cost of common equity (in the form of retained earnings) is 16.00 percent. a. What is the firm's weighted average cost of capital? Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Common equity Weighted Cost 3.60% 9.60 Weighted average cost of capital 13.20 % An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 10.00 percent, and the cost of common equity (in the form of retained earnings) is 18.00 percent. b. Recalculate the firm's weighted average cost of capital. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Weighted Cost % Common equity Weighted average cost of capital 0.00 % Evans Technology has the following capital structure. Debt Common equity 40% 60 The aftertax cost of debt is 9.00 percent, and the cost of common equity (in the form of retained earnings) is 16.00 percent. a. What is the firm's weighted average cost of capital? Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Common equity Weighted Cost 3.60% 9.60 Weighted average cost of capital 13.20 % An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 10.00 percent, and the cost of common equity (in the form of retained earnings) is 18.00 percent. b. Recalculate the firm's weighted average cost of capital. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Debt Weighted Cost % Common equity Weighted average cost of capital 0.00 %

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a To calculate the firms weighted average cost of capital WACC under the current capital structure 1 ... View the full answer