The table below shows a simplified balance sheet for Rensselaer Felt. The debt h
ID: 2632519 • Letter: T
Question
The table below shows a simplified balance sheet for Rensselaer Felt. The debt has just been refinanced at an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the companys shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%.
Calculate this company's weighted-average cost of capital. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The table below shows a simplified balance sheet for Rensselaer Felt. The debt has just been refinanced at an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the companys shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Calculate this company's weighted-average cost of capital. (Do not round intermediate calculations. Round your answer to 2 decimal places.)Explanation / Answer
long term debt = 210200
short term debt = 77200
shareholders equity = 7.62 * 40 = 304,800
total = 592200
WACC
= [7.5% * (1-0.35) * 77200/592200] + [9.5% * (1-0.35) * 210200/592200] + [16.50% * 304800/592200]
= 11.32%
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