Question
Compute the weighted average cost of capital for each of these firms. Assume a marginal tax rate of 40 percent. Target capital structure is 40%
Compute the weighted average cost of capital for each of these firms. Assume a marginal tax rate of 40 percent. Target capital structure is 40% debt and 60% common equity. Yield to maturity on bonds is 8.5% and expected return on common equity is 11.1%. Target capital structure is 30% debt and 70% common equity. Yield to maturity on bonds is 6.7% and expected return on common equity is 9.5%. Target capital structure is 10% debt and 90% common equity. Yield to maturity on bonds is 7.9% and expected return on common equity is 9.9%. Target capital structure is 60% debt and 40% common equity. Yield to maturity on bonds is 4.9% and expected return on common equity is 12.1%. Target capital structure is 80% debt and 20% common equity. Yield to maturity on bonds is 6.1% and expected return on common equity is 16.0%.
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