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XERCISE 5: COST OF BORROWING AND COST OF CAPITAL Sources Amounts Trade and other payables $200,000 Short-term borrowings 250.000 Mortgage 500,000 Long-term borrowing 250,000 Share
XERCISE 5: COST OF BORROWING AND COST OF CAPITAL Sources Amounts Trade and other payables $200,000 Short-term borrowings 250.000 Mortgage 500,000 Long-term borrowing 250,000 Share capital 300,000 Retained earnings 800,000 The before-tax bank charges are 11.0% for the short-term borrowings, 10.0% for the long-term borrowings, and 10.5% on the mortgage. The shareholders expect to earn 16%. Assume that the company's income tax rate is 50%. Questions 1. Calculate the company's after-tax cost of borrowing. 2. Calculate the company's weighted average cost of capital
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