2 CHAPTER 1 Overview of Financial Management Change in trade receivables Net change in short-term borrowings Sale of non-current assets Change in trade and other payables Additions to property, plant, and equipment EXERCISE 5: COST OF BORROWING AND COST OF CAPITAL Sources Trade and other payables Short-term borrowings Mortgage Long-term borrowings Share capital Retained earnings Amounts $200,000 250,000 500,000 250,000 300,000 800,000 The before-tax bank charges are 11.0% for the short-term borrowings, 10.0% for the long-term borrowings, and 10.5% on the mortgage. The shareholders expect to earn 16%. Assume that the company's income tax rate is 50%. Questions 1. Calculate the company's after-tax cost of borrowing. 2. Calculate the company's weighted average cost of capital.