There are good reasons to use equity and there are good reasons to use debt, Victoria said.
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“There are good reasons to use equity and there are good reasons to use debt,” Victoria said. “You said that you thought Brenda would want about 20% return on her investment. Currently interest rates are running 8%. Let’s figure the weighted average cost of capital for 25/75, for 50/50 and for 75/25 mixes of equity to debt.”
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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