Question
(a) A company has a target capital structure of 40% debt and 60% equity. The company's before-tax cost of debt is 7% and its cost
(a) A company has a target capital structure of 40% debt and 60% equity. The company's before-tax cost of debt is 7% and its cost of equity is 12%. Calculate the weighted average cost of capital (WACC) for the company.
(b) Explain the concept of the marginal cost of capital and how it is used in investment decision-making.
(c) If the company's tax rate is 30%, calculate the after-tax cost of debt and the adjusted WACC.
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The Complete Personal Finance Handbook
Authors: Teri B Clark
1st Edition
160138047X, 978-1601380470
