Managerial Accounting:

Please explain where the fractions (1/10), (3/10), and (6/10) come from.

111. Young Company has a tax rate of 40 percent. Information for the company is as follows: Mortgage bonds Unsecured bonds Common stock Amount $1,000,000 3,000,000 6,000,000 After-tax Cost 0.048 0.050 0.150 What is the weighted cost of capital? a. 0.1098 b. 0.2480 c. 0.0827 d. 0.0366 ANS: A SUPPORTING CALCULATIONS: (1/10 x 0.048) + (3/10 x 0.050) + (6/10 x 0.150) = 0.1098