WACC. Eric has another get-rich-quick idea, but needs funding to support it. He

Question

WACC. Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $4,776 from Wendy, who will charge him 5% on the loan. He will al What is the weighted average cost of capital for Eric? so borrow $3,046 from Bebe, who will charge him 7 % on the loan,and $2,178 from Shelly, who ill har ehi 13%onthe loan. What is the weighted average cost of capital for Eric? (96 (Round to two decimal places.) Enter your answer in the answer box. 10

Explanation / Answer

Total borrowings=(4776+3046+2178)=$10000

WACC=Respective costs*Respective weighs

=(4776/10000*5)+(3046/10000*7)+(2178/10000*13)

which is equal to

=7.35%(Approx).

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

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