Financial accounting A company has long-term debt of $25 million,which has an average interest rate of 11%. Thecompany's market capitalization is $70million. If the tax rate is 45% and the cost ofequity is 16%, determine the weightedaverage cost of capital.

Step 1: Define Weighted Average Cost of CapitalThe weighted average cost of capital is the weighted…

Answered: A company has long-term debt of $25…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company has long-term debt of $25 million, which has an average interest rate of 11%. The company's market capitalization is $70 million. If the tax rate is 45% and the cost of equity is 16%, determine the weighted average cost of capital.