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Accounting
corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital.

corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital.

FINANCIAL ACCOUNTING
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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ABC Company's cost of equity is 18%, its before-tax cost of debt is 8%, and its corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital. Assets Liabilities Cash P 100 Accounts payable P 200 Accounts Receivable 400 Accrued taxes due 200 Inventories 200 Long-term debt 400 Plant & equipment 1,300 Equity 1,200 P2.000 P2,000
Transcribed Image Text:ABC Company's cost of equity is 18%, its before-tax cost of debt is 8%, and its corporate tax rate is 40%. Given the following balance sheet, calculate the after-tax weighted-average cost of capital. Assets Liabilities Cash P 100 Accounts payable P 200 Accounts Receivable 400 Accrued taxes due 200 Inventories 200 Long-term debt 400 Plant & equipment 1,300 Equity 1,200 P2.000 P2,000
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