The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows:     Cash and marketable securities € 3,200   Short-term debt € 77,300   Accounts receivable   121,700   Accounts payable   63,700   Inventory   126,700   Current liabilities € 141,000   Current assets € 251,600           Property, plant, and equipment   213,700   Long-term debt   210,300   Deferred taxes   46,700           Other assets   87,300   Shareholders' equity   248,000   Total € 599,300   Total € 599,300     The debt has just been refinanced at an interest rate of 7.75% (short term) and 9.75% (long term). The expected rate of return on the company's shares is 16.75%. There are 7.63 million shares outstanding, and the shares are trading at €39. The tax rate is 25%. Calculate this company's weighed-average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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
icon
Related questions
icon
Concept explainers
Topic Video
Question

The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows:
 

 
Cash and marketable securities 3,200   Short-term debt 77,300  
Accounts receivable   121,700   Accounts payable   63,700  
Inventory   126,700   Current liabilities 141,000  
Current assets 251,600          
Property, plant, and equipment   213,700   Long-term debt   210,300  
Deferred taxes   46,700          
Other assets   87,300   Shareholders' equity   248,000  
Total 599,300   Total 599,300  
 


The debt has just been refinanced at an interest rate of 7.75% (short term) and 9.75% (long term). The expected rate of return on the company's shares is 16.75%. There are 7.63 million shares outstanding, and the shares are trading at €39. The tax rate is 25%.

Calculate this company's weighed-average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 2 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education