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?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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?

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