Based on the following information, what is the firm's weighted average cost of capital of the operating Cost of debt, RD: 7% Cost of equity, Rs: 20% Total market value of debt, D: 500 Total market value of equity, S: 1,500 Number of common shares outstanding: 100 Total market value of non-operating assets, N: 200 Cost of non-operating assets, RN: 9% Corporate tax rate, T: 40% a. .143009 b. 168751

Based on the following information, what is the firm's weighted average cost of capital of the operating Cost of debt, RD: 7% Cost of equity, Rs: 20% Total market value of debt, D: 500 Total market value of equity, S: 1,500 Number of common shares outstanding: 100 Total market value of non-operating assets, N: 200 Cost of non-operating assets, RN: 9% Corporate tax rate, T: 40% a. .143009 b. 168751

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Description: Based on the following information, what is the firm's weighted average cost of capital of the operating assets, WACCO?Cost of debt, RD: 7%Cost of equity, Rs: 20%Total market value of debt, D: 500Total market value of equity, S: 1,500Number of commo

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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Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

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Question

Based on the following information, what is the firm's weighted average cost of capital of the operating assets, WACCO?
Cost of debt, RD: 7%
Cost of equity, Rs: 20%
Total market value of debt, D: 500
Total market value of equity, S: 1,500
Number of common shares outstanding: 100
Total market value of non-operating assets, N: 200
Cost of non-operating assets, RN: 9%
Corporate tax rate, T: 40%
O
.143009
b. 168751
a.
c. .188232
d. .127767

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