Evans Technology has the following capital structure. The aftertax cost of debt

Question

Evans Technology has the following capital structure.

The aftertax cost of debt is 6 percent; and the cost of common equity (in the form of retained earnings) is 13 percent.

What is the firm’s weighted average cost of capital? (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

   

Recalculate the firm's weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

   

   

Evans Technology has the following capital structure.

Explanation / Answer

C.

Plan a

As its 10.2% WACC is less than plan b WACC which is 11%

Cost weight weighted cost a. Debt 6% 40% 2.4% Equity 13% 60% 7.8% WACC 10.2% b. Debt 7% 50% 3.5% Equity 15% 50% 7.5% WACC 11%

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.