Suppose you have a market value of equity equal to $ 500 million and a market value of debt equal to $475 million. What are the capital structure weights?
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- a) Calculate the weighted average cost of capital using following information: Total Cost of debt 4.40%. = 0.78 • Income tax rate Value of total debt = 16,595,600 OMR • Value of total debt = 6,595,325 OMR • Cost of equity %3D = 9.17% . b) Why weighted average cost of capital is important for capital structure decision making?Question #5. When calculating the weighted average cost of capital (WACC), should we use marketvalues or balance sheet values as the weights of debt and equity? Explain your responseWhat is the debt ratio at the optimal capital structure of XYZ Inc.?
- Which of the following statements describes the cost of capital? A) The internal rate of return on investments B) The maximum acceptable rate of return on investments C) The minimum rate of return on investments D) The interest rate the bank charges its best customers20. Weighted average cost of capital is the combined cost of capital using a capital mix. The capital mix should be measured in terms of: a. Carrying value of debt and equity b. Contribution margin ratio c. Carrying value of total assets d. Market value of debt and equityCalculate Ndovu plc’s weighted average cost of capital, based on the CAPM computed cost of equity. Discuss the appropriateness of using the weighted average cost of capital calculated above as Ndovu plc’s discount rate.
- In computing the cost of capital, the cost of debt capital is determined by Group of answer choices the capital asset pricing model. interest rate times (1 – the firm’s tax rate) annual interest payment divided by the book value of the debt. annual interest payment divided by the proceeds from debt issuance.Discuss the Weighted Average Cost of Capital (WACC). Why do firms calculate their weighted average cost of capital?Sainsbury is financed by both debt and equity. calculate the weighted average cost of capital (WACC) of Sainsbury.
- What is the Cost of Equity?What is the Weighted Average Cost of Capital?WACCBased on the given information, how much is the weighted average cost of capital? *The weights used in calculating the weighted average cost of capital should be based on ________. a book values b estimated future values c market values
