Rancho Cucamonga, Inc. presents the following excerpts from its December 31, 2020 balance sheet: Long-Term Liabilities: Note payable, 8% $200,000 Bonds payable, 10% 1,000,000 Shareholders’ Equity Common stock, par 50,000 Additional paid-in-capital, common stock 350,000 Total contributed capital 400,000 Retained earnings 250,000 Total shareholders’ equity 650,000 The accounting department also conveys the following information: Risk-free rate of return - 3% Risk premium - 4.05% Tax rate – 30% Requirement: Compute Rancho Cucamonga’s weighted average cost of capital.
Rancho Cucamonga, Inc. presents the following excerpts from its December 31, 2020 balance sheet: Long-Term Liabilities: Note payable, 8% $200,000 Bonds payable, 10% 1,000,000 Shareholders’ Equity Common stock, par 50,000 Additional paid-in-capital, common stock 350,000 Total contributed capital 400,000 Retained earnings 250,000 Total shareholders’ equity 650,000 The accounting department also conveys the following information: Risk-free rate of return - 3% Risk premium - 4.05% Tax rate – 30% Requirement: Compute Rancho Cucamonga’s weighted average cost of capital.
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
Problem 1PS
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Question
Rancho Cucamonga, Inc. presents the following excerpts from its December 31, 2020 balance sheet:
|
Long-Term Liabilities: |
|
|
Note payable, 8% |
$200,000 |
|
Bonds payable, 10% |
1,000,000 |
|
Shareholders’ Equity |
|
|
Common stock, par |
50,000 |
|
Additional paid-in-capital, common stock |
350,000 |
|
Total contributed capital |
400,000 |
|
|
250,000 |
|
Total shareholders’ equity |
650,000 |
The accounting department also conveys the following information:
- Risk-free
rate of return - 3% - Risk premium - 4.05%
- Tax rate – 30%
Requirement: Compute Rancho Cucamonga’s weighted average cost of capital.
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