Performance City supplies helicopters to corporate clients.i (Click the icon to view additional information.)Requirement a. What is Performance City's weighted average cost of capital?Begin by determining the formula to calculate WACC.New York:XChicago:) + (-(C(Enter the amount as a decimal. Round the WACC to five decimal places, in the format X.XXXXX.)The company's WACC isRequirement b. Compute each division's Economic Value Added.Determine the formula to calculate the EVA of each city. Then enter the amounts for New York and Chicago and calculate the EVA for each. (Entethe WACC to five decimal places in the format X.XXXXX. Round your intermediary calculations to the nearest whole number. Use parentheses ora minus sign when entering a negative EVA. Abbreviation used: inc. = income.)-(x (× (The company's results for 2020 are as follows:(Click the icon to view the data.)Read the requirements.X)) == WACC)) =EVA More infoPerformance City has two sources of funds: long-term debt with a market and bookvalue of $34 million issued at an interest rate of 10% and equity capital that has amarket value of $12 million (book value of $7 million). The cost of equity capital forPerformance City is 16%, and its tax rate is 40%. Performance City has divisions intwo cities that operate autonomously.Data tableOperating IncomeNew York $ChicagoAssets Current Liabilities2,400,0003,600,0002,250,000 $ 12,000,000 $2,900,000 10,500,000X

The weighted average cost of capital of an entity represent the overall cost of capital. The…

Performance City has two sources of funds: long-term debt with a market and book value of $34 million issued at an interest rate of 10% and equity capital that has a market value of $12 million (book value of $7 million). The cost of equity capital for Performance City is 16%, and its tax rate is 40%. Performance City has divisions in two cities that operate autonomously.

Performance City has two sources of funds: long-term debt with a market and book value of $34 million issued at an interest rate of 10% and equity capital that has a market value of $12 million (book value of $7 million). The cost of equity capital for Performance City is 16%, and its tax rate is 40%. Performance City has divisions in two cities that operate autonomously.

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter10: The Cost Of Capital

Section: Chapter Questions

Problem 3TCL: CALCULATING 3Ms COST OF CAPITAL In this chapter, we described how to estimate a companys WACC, which...

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