Question
Given the optimal cost of capital of 11.8%. Debt/Asset% = 40% . A. Construct a balance sheet showing that combination of debt and equity financing
Given the optimal cost of capital of 11.8%. Debt/Asset% = 40% .
A. Construct a balance sheet showing that combination of debt and equity financing using the following information:
Balance Sheet for Firm X as of XX/XX/XX
Assets $150,000 Debt __________
Equity ___________
Total $150,000
B. The debt pays interest of 10.0% annually, and the firm is in the 30 percent marginal tax bracket. What is the after-tax cost of debt?
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Public Finance and Public Policy
Authors: Jonathan Gruber
4th edition
1429278455, 978-1429278454
