Question
(A) ABC inc's total value of capital is $1000000.lt's cost of equity is 12% and it's cost of Debt is 9%. Its capital structure
(A) ABC inc's total value of capital is $1000000.lt's cost of equity is 12% and it's cost of Debt is 9%. Its capital structure is $400000 in equity and $600000 in debt.What is its WACC ? (B) Let the required return on Assets be 12%,and the cost of equity be 14%. The capital structure is 55% equity.Find out the cost of debt? (C) In Question (B) above,suppose the cost of equity is 16% and the cost of debt is what you calculated in question (B). What would be the D/E ratio?What would be the percentage debt?Percentage Equity? (D)Why is WACC, CA, considered as a proxy for risk?
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College Mathematics for Business Economics Life Sciences and Social Sciences
Authors: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen
12th edition
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