A. The Manix Company was recently formed to manufacture a new product. It has the following capital structure in market value terms: K Debentures 6,000,000 Preferred stock 2,000,000 Common stock (320,000 shares) 8,000,000 Total. 16,000,000 The company has a marginal tax rate of 40 percent. A study of publicly held companies in this line of business suggests that the required return on equity is about 17 percent (The CAPM approach was used to determine the required rate of return). The Manix Company’s debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Required Calculate the firm’s present weighted average cost of capital
QUESTION THREE
A. The Manix Company was recently formed to manufacture a new product. It has the following capital structure in market value terms:
K
Debentures 6,000,000
Common stock (320,000 shares) 8,000,000
Total. 16,000,000
The company has a marginal tax rate of 40 percent. A study of publicly held companies in this line of business suggests that the required
Required
Calculate the firm’s present weighted average cost of capital
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