Question

The company has previous debt that includes a $3,000,000 (4% interest) and $2,000,000 (5% interest). What...

The company has previous debt that includes a $3,000,000 (4% interest) and $2,000,000 (5% interest). What is the weighted-average interest on these other loans? Optional Answers: 1. 1.00% 2. 4.40% 3. 4.50% 4. 9.00%

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Correct Answer:

Option: 4.40%

Working:

D

Weight of Debt

F

G=E*F

A

$           3,000,000.0

60%

4%

2.400%

B

$           2,000,000.0

40%

5%

2.00%

C=A+B

$           5,000,000.0

100%

4.40%

End of Answer.

Thanks

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company has total stockholders' equity of $2,000,000 and total debt of $3,000,000. The equity ratio...
A company has total stockholders' equity of $2,000,000 and total debt of $3,000,000. The equity ratio is: 40%. Can someone explain how to arrive at the 40%?
2. XYZ has total assets of $3,000,000 financed by debt of $2,000,000 and equity capital of...
2. XYZ has total assets of $3,000,000 financed by debt of $2,000,000 and equity capital of $1,000,000. The pretax cost of debt is 6% and the cost of equity capital is given at 10%. XYZ has pretax income (before deduction of interest expense) of $300,000 and is taxed at 40%. Calculate residual income in year 1 (after deducting an equity charge). 3. Same facts as problem 2. XYZ is expected to earn pretax income (before deduction of interest expense) of...
West Oil Company, LLC has three long term loans (interest bearing debt): loan #1 with a...
West Oil Company, LLC has three long term loans (interest bearing debt): loan #1 with a balance of $300,000 at 8% interest; loan #2 with a balance of $400,000 at 5% interest, and loan #3 with a balance of $100,000 at 10% interest. The company has accounts payable of $70,000 (non-interest bearing) and equity of $1,200,000. It estimates that its cost of equity is 11%. Its tax rate is 34% 1. What is the company’s weighted average cost of capital...
Your company has the debt to equity breakdown below. The cost of debt is 4% (based...
Your company has the debt to equity breakdown below. The cost of debt is 4% (based on the interest on debt of 5% and the tax rate of 20%) and the cost of the equity is 8%.      COST OF CAPITAL PROPORTION OF TOTAL ASSETS Equity 8% .50 Debt 4% based on interest rate(1-t) .50 A) What is your company’s Weighted Average Cost of Capital (WACC)? B) Your company’s Recruiting Division has $920,000 in total assets, which is the total...
A company currently has the debt-to-equity ratio of 1/3. Its cost of debt is 4% before...
A company currently has the debt-to-equity ratio of 1/3. Its cost of debt is 4% before tax and its cost of equity is 12%. Assume that the company is considering raising the debt-to-equity ratio to 1/2. The tax rate is 20%. What is its new cost of equity under the new debt-to-equity ratio? What is its new weighted average cost of capital (WACC) under the new debt-to-equity ratio.
A company has $400 million worth of debt outstanding with an average interest rate of 5%...
A company has $400 million worth of debt outstanding with an average interest rate of 5% and 50 million common shares outstanding worth $12 each. The company’s tax rate is 20%, beta is 1.2, the yield on 10-year Treasury notes is 1.5% and the expected market return is 9.5%. What is the company’s weighted average cost of capital (WACC) based on the current weights for debt and common stock in its capital structure?
A company has $400 million worth of debt outstanding with an average interest rate of 5%...
A company has $400 million worth of debt outstanding with an average interest rate of 5% and 50 million common shares outstanding worth $12 each. The company’s tax rate is 20%, beta is 1.3, the yield on 10-year Treasury notes is 1.5% and the expected market return is 9.5%. What is the company’s weighted average cost of capital (WACC) based on the current weights for debt and common stock in its capital structure?
A company has $400 million worth of debt outstanding with an average interest rate of 5%...
A company has $400 million worth of debt outstanding with an average interest rate of 5% and 50 million common shares outstanding worth $12 each. The company’s tax rate is 20%, beta is 1.3, the yield on 10-year Treasury notes is 1.5% and the expected market return is 9.5%. What is the company’s weighted average cost of capital (WACC) based on the current weights for debt and common stock in its capital structure?
A company has a cost of common equity capital of 17 % and its cost of...
A company has a cost of common equity capital of 17 % and its cost of debt capital is 6 %. The firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt. What is its after-tax weighted average cost of capital if it is subject to a 25 % tax rate?
ABC Company has $700,000 in equity and $1,200,000 in debt. The CFO has determined that the...
ABC Company has $700,000 in equity and $1,200,000 in debt. The CFO has determined that the flotation cost of equity is 2.5% and the flotation cost of debt is 3.5%. The company needs $3,000,000 for a company project. What is ABC’s weighted average flotation cost? _______________ What is the amount the bank will have to raise to cover the company’s needs and its own fees? __________________
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT