Capital structure

After financing the expansion, 60 percent of BlueVal's capital equity has an estimated cost of 22.5 percent. 40 percent of BlueVal's capital comes from debt, with half at an interest rate of 10 percent (mortgage rate) and half at 8 percent for the proposed new line of credit. The cost of debt is lower than expected because of the 34 percent expected tax savings.

Capital transaccin as of december 31 Proponed new financing Total after new financia

Shareholders'Equity 1,726,883 800,000 2,526,883

Mortagage Outstandings 900,000 900,000

Credit Line 800,000 800,000

Total Capital 2,626,883 1,600,000 4,226,883

• Weight the individual capital source costs by their percentage in the company's total capital structure.
• Explain your weightages.