QUESTION 35 Wellington Gas has a target capital structure of 50% common equity, 40% debt, and 10% preferred stock. The cost of retained earnings is 16%, and the cost of new equity (external) is 16.7%. Wellington can sell debentures that will have an after-tax cost of 8.3% and the after-tax cost of preferred stock will be 11.9%. What is the marginal cost of capital before and after the break point? a. 12.51% and 11.53% b. 14.23% and 14.68% c. 11.18% and 11.53% d. 12.51% and 12.86
QUESTION 35 Wellington Gas has a target capital structure of 50% common equity, 40% debt, and 10% preferred stock. The cost of retained earnings is 16%, and the cost of new equity (external) is 16.7%. Wellington can sell debentures that will have an after-tax cost of 8.3% and the after-tax cost of preferred stock will be 11.9%. What is the marginal cost of capital before and after the break point? a. 12.51% and 11.53% b. 14.23% and 14.68% c. 11.18% and 11.53% d. 12.51% and 12.86
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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QUESTION 35
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Wellington Gas has a target capital structure of 50% common equity, 40% debt, and 10%
preferred stock . The cost ofretained earnings is 16%, and thecost of new equity (external) is 16.7%. Wellington can sell debentures that will have an after-tax cost of 8.3% and the after-tax cost of preferred stock will be 11.9%. What is the marginal cost of capital before and after the break point?a. 12.51% and 11.53%b. 14.23% and 14.68%c. 11.18% and 11.53%d. 12.51% and 12.86
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