Quantcast

Got Homework?

Connect with other students for help. It's a free community.

  • across
    MIT Grad Student
    Online now
  • laura*
    Helped 1,000 students
    Online now
  • Hero
    College Math Guru
    Online now

Here's the question you clicked on:

55 members online
  • 0 replying
  • 0 viewing

momr1958

Can someone please help with this problem. A firm’s current balance sheet is as follows: Assets $100 Debt $10 Equity $90 a. What is the firm’s weighted-average cost of capital at various combinations of debt and equity, given the following information? Debit/Assets 0%, 10%, 20%, 30%, 40% 50%, 60% After-tax cost of Debt 8%, 8%, 8%, 9%, 10%, 12% Cost of Equity 12%, 12%, 12%, 13%, 14%, 15%, 16% B) Construct a pro forma balance sheet that indicates the firm's optimal capital structure. Compare this balance sheet with firm's current balance sheet. What course of action should the firm tak

  • 2 years ago
  • 2 years ago

  • This Question is Closed
  1. sailu001
    Best Response
    You've already chosen the best response.
    Medals 0

    wacc=cost of debt*(portion of debt in capital structure)+cost of equity *(portion of equity in capital) if debt=10 and equity=90 cost of debt=8% cost of equity=12% (as the present ratio shows debt/asset=10/100=10% so corresponding values of cost of debt(which has no effect of tax as it is paid before tax is paid)=8%,cost of equity=12% wacc=8%*.1+12%*.9=11.6%

    • 2 years ago
    • Attachments:

See more questions >>>

Your question is ready. Sign up for free to start getting answers.

spraguer (Moderator)
5 → View Detailed Profile

is replying to Can someone tell me what button the professor is hitting...

23

  • Teamwork 19 Teammate
  • Problem Solving 19 Hero
  • You have blocked this person.
  • ✔ You're a fan Checking fan status...

Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.

This is the testimonial you wrote.
You haven't written a testimonial for Owlfred.