Ghirardelli currently has no loans. The company's cost of capital is 9 percent annually. Ghirardelli expects a cash inflow of $135,000 in annual earnings before interest and taxes, forever. The company faces a 23 % tax rate on all taxable income. If Ghirardelli does decide to borrow money, it will do so by issuing corporate bonds. If this happens, the interest rate on the bonds will be 6%. a. Ghirardelli's cost of equity will equal if it borrows $183,000 and uses it to back its shares of stock. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Continue part (a)- In addition, in this case Ghirardelli's weighted average cost of capital will equal (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Ghirardelli currently has no loans. The company's cost of capital is 9 percent annually. Ghirardelli expects a cash inflow of $135,000 in annual earnings before interest and taxes, forever. The company faces a 23 % tax rate on all taxable income. If Ghirardelli does decide to borrow money, it will do so by issuing corporate bonds. If this happens, the interest rate on the bonds will be 6%. a. Ghirardelli's cost of equity will equal if it borrows $183,000 and uses it to back its shares of stock. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Continue part (a)- In addition, in this case Ghirardelli's weighted average cost of capital will equal (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10P: The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new...

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