a-2. Calculate Tyler's weighted average cost of capital. (Round the final answers to 2 decimal places.) Weighted Cost Debt (kd) Preferred stock (Kp) Common equity (ke) Weighted average cost of capital (K) b. Which plan is optimal in terms of minimizing the weighted average cost of capital? Plan 1 Plan 2 The Tyler Oll Company's capital structure is as follows: Debt Preferred stock Common equity 60% 5 35 The aftertax cost of debt is 10 percent; the cost of preferred stock is 13 percent; and the cost of common equity (in the form of retained earnings) is 16 percent. a-1. Calculate Tyler Oil Company's weighted average cost of capital. (Round the final answers to 2 decimal places.) Weighted Cost Debt (kd) Preferred stock (Rp) Common equity (Ke) Weighted average cost of capital (ka) As an alternative to the capital structure shown above for Tyler Oil Company's, an outside consultant has suggested the following modifications. Debt Preferred stock Common equity 304 le 60 Under this new and more debt-oriented arrangement, the aftertax cost of debt is 12.0 percent, the cost of preferred stock is 15 percent, and the cost of common equity (in the form of retained earnings) is 18.5 percent. a-2. Calculate Tyler's weighted average cost of capital. (Round the final answers to 2 decimal places.) | a-2. Calculate Tyler's weighted average cost of capital. (Round the final answers to 2 decimal places.) Weighted Cost Debt (kd) Preferred stock (Kp) Common equity (ke) Weighted average cost of capital (K) b. Which plan is optimal in terms of minimizing the weighted average cost of capital? Plan 1 Plan 2 The Tyler Oll Company's capital structure is as follows: Debt Preferred stock Common equity 60% 5 35 The aftertax cost of debt is 10 percent; the cost of preferred stock is 13 percent; and the cost of common equity (in the form of retained earnings) is 16 percent. a-1. Calculate Tyler Oil Company's weighted average cost of capital. (Round the final answers to 2 decimal places.) Weighted Cost Debt (kd) Preferred stock (Rp) Common equity (Ke) Weighted average cost of capital (ka) As an alternative to the capital structure shown above for Tyler Oil Company's, an outside consultant has suggested the following modifications. Debt Preferred stock Common equity 304 le 60 Under this new and more debt-oriented arrangement, the aftertax cost of debt is 12.0 percent, the cost of preferred stock is 15 percent, and the cost of common equity (in the form of retained earnings) is 18.5 percent. a-2. Calculate Tyler's weighted average cost of capital. (Round the final answers to 2 decimal places.) |