Finance Learning exp.2

Aug 24th, 2014
SoccerBoss
Category:
Business & Finance
Price: $5 USD

Question description

Sources

Amounts

Trade and other payables

$200,000

Short-term borrowings

250,000

Mortgage

500,000

Long-term borrowings

250,000

Share capital

300,000

Retained earnings

800,000


The before-tax bank charges are 11.0% for the short-term borrowings, 10.0% for the long-term borrowings, and 10.5% on the mortgage. The shareholders expect to earn 16%. Assume that the company’s income tax rate is 50%.

Questions

1.  Calculate the company’s after-tax cost of borrowing rounded to the nearest tenth of a percent. 

2.  Calculate the company’s weighted average cost of capital rounded to the nearest tenth of a percent.


Tutor Answer

(Top Tutor) Daniel C.
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