Question
I have included given information. I did questions 1 thru three, but am struggling with my formula for question 4 and need assistance on 5
I have included given information. I did questions 1 thru three, but am struggling with my formula for question 4 and need assistance on 5 and 6. Any help with how to set up would be greatly appreciated.
Question 4: Using the above information, calculate Zonk's weighted-average cost of capital:
A. 11.5%
B. 7.97%
C. 7.48%
D. 10.90%
Question 5: Assume that Zonk is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure that has 70 percent debt with a pretax borrowing cost of 14 percent and 30 percent common equity. Compute the revised equity beta for Zonk based on the new capital structure.
A. 4.35
B. 4.34
C. 2.84
D. 3.91
Question 6: Assume that Zonk is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure that has 70 percent debt with a pretax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zonk based on the new capital structure.
A. 8.85%
B. 12.56%
C. 13.01%
D. 9.94%
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