For questions 17 – 20 use the following information: West Oil Company, LLC has three long term loans (interest bearing debt): loan #1 with a balance of $300,000 at 8% interest; loan #2 with a balance of $400,000 at 5% interest, and loan #3 with a balance of $100,000 at 10% interest. The company has accounts payable of $70,000 (non-interest bearing) and equity of $1,200,000. It estimates that its cost of equity is 11%. Its tax rate is 34%. What is the company’s weighted average cost of capital on total invested capital (total assets)? Include non-interest bearing debt, interest bearing debt, and equity.
For questions 17 – 20 use the following information: West Oil Company, LLC has three long term loans (interest bearing debt): loan #1 with a balance of $300,000 at 8% interest; loan #2 with a balance of $400,000 at 5% interest, and loan #3 with a balance of $100,000 at 10% interest. The company has accounts payable of $70,000 (non-interest bearing) and equity of $1,200,000. It estimates that its cost of equity is 11%. Its tax rate is 34%. What is the company’s weighted average cost of capital on total invested capital (total assets)? Include non-interest bearing debt, interest bearing debt, and equity.
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
Section: Chapter Questions
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For questions 17 – 20 use the following information: West Oil Company, LLC has three long term loans (interest bearing debt): loan #1 with a balance of $300,000 at 8% interest; loan #2 with a balance of $400,000 at 5% interest, and loan #3 with a balance of $100,000 at 10% interest. The company has accounts payable of $70,000 (non-interest bearing) and equity of $1,200,000. It estimates that its cost of equity is 11%. Its tax rate is 34%.
What is the company’s weighted average cost of capital on total invested capital (total assets)? Include non-interest bearing debt, interest bearing debt, and equity.
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