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Suppose a firm is using only two forms of financing i.e. Debt and Equity. Consider the following capital structure with different debt-equity combinations and calculate
Suppose a firm is using only two forms of financing i.e. Debt and Equity. Consider the following capital structure with different debt-equity combinations and calculate Weighted Average Cost of Capital
| Financial Plan | Components | Cost | Weights | Weighted Cost |
| A | Debt | 5.5% | 20% |
|
| Equity | 10.5% | 80% |
| |
| Weighted Average Cost of Capital |
| |||
| B | Debt | 9.0% | 20% |
|
| Equity | 11.5% |
|
| |
| Weighted Average Cost of Capital |
| |||
| C | Debt | 7.0% | 45% |
|
| Equity | 5.0% |
|
| |
| Weighted Average Cost of Capital |
| |||
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