A public company has the following balance sheet ($000’s) Cash $540 Accounts Receivable $4,580 Inventories $7,400 Long Term Debt $12,590 Net Fixed Assets $18,955 Common Equity $18,885 Total Assets...


A public company has the following balance sheet ($000’s)



Cash                                      $540


Accounts Receivable        $4,580


Inventories                        $7,400              Long Term Debt                   $12,590


Net Fixed Assets             $18,955              Common Equity                 $18,885


              Total Assets       $31,475              Total debt & Equity             $31,475


At present, the firm’s common stock is selling for a price equal to its book value, and the form’s bonds are selling at par.  The market requires a 15% return on the common stock, the firm’s bond’s command a yield to maturity of 8% and firm faces a tax rate of 34%.  What is the firm’s weighted average cost of capital?



Jun 10, 2022
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