Question

The Golden Eagle Corporation has the following items on their income and balance sheets (values in tables are in thousands:

Balance Sheet Items
(Assets)

	Last Year	Two Years Ago
Cash	440	500
Accounts Receivable	570	490
Inventory	285	286
Total Current Assets
Fixed Assets	5300	4800
Depreciation	2355	2056
Net Fixed Assets

Balance Sheet Items
(Liabilities)

Accounts Payable	550	510
Notes Payable	88	91
Total Current Liabilities
Long Term Liabilities	1060	980
Total Liabilities
Preferred Stock	1080	1080
Common Stock	3250	3250
Retained Earnings	1375	1030
Total Liabilities and Equity

Income Statement Items

	Past Year	Two Years Ago
Sales	3160	2600
Cost of Goods Sold	1820	1780
Operating Expenses	575	545
Interest (Paid L/T Debt)	53	92
Taxes Paid	84	77
Preferred Stock Dividends Paid	73	22

What is the Weighted average cost of capital for last year for Golden Eagle if the rate on the common stock is 11.80%? Express your answer as .xxxx.

(Hint: First Calculate the Percentages of Common Stock, Preferred Stock, and Long-Term Debt. Do not include Retained Earnings. Net compute the rate [percentage cost] for Long-Term Debt and Preferred Stock. Then compute the weighted average.)

Answer 1

Weighted Average Cost of Capital of the Last Year was 9.28%