Question
A. The capital structure for a firm is 32% debt, 20% preferred equity and 48% common equity. The yield on the firm's bonds is 9%.
A. The capital structure for a firm is 32% debt, 20% preferred equity and 48% common equity. The yield on the firm's bonds is 9%. The firm has a beta of 1.22. The risk free rate is 2% and the return on a broad market index is 8%. If the cost of preferred equity is 8.2% and the firm's tax rate is 40%, determine the WACC.
7.1101% | ||
7.4512% | ||
6.9981% | ||
7.8416% | ||
none of these |
B. A company negotiates a 5% loan with a limit of $1,300,000 with their bank. The firm uses 34% debt, 12% preferred equity, and 52% common equity in its capital structure. At what level of the total funding will the firm exhaust the available funds from the loan?
$3.824 million | ||
$3.635 million | ||
$3.529 million | ||
$3.332 million | ||
none of these |
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