ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently have an effective tax rate of 30%. The company’s cost of equity capital is 12%. To obtain their debt financing, they issue bonds with an interest rate of 10%. What is the company’s weighted average cost of capital? a.8.0% b.11.0% c.11.6% d.10.4%
ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently have an effective tax rate of 30%. The company’s cost of equity capital is 12%. To obtain their debt financing, they issue bonds with an interest rate of 10%. What is the company’s weighted average cost of capital? a.8.0% b.11.0% c.11.6% d.10.4%
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 9P
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ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently have an effective tax rate of 30%. The company’s
a.8.0%
b.11.0%
c.11.6%
d.10.4%
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