Weighted Average Costs of Capital

Weighted Average Costs of Capital.

I need support with this Business question so I can learn better.

The Expanding Capital Corporation has a current capital structure of $15 million in secured bonds paying 6.5% annual interest, $10 million in preferred stock with a par value of $50 per share and an annual dividend of $3.80 per share, and common stock with a book value of $75 million. It is about to issue new debentures in the amount of $10 million paying 7.5% annual interest. Its CFO says its marginal tax rate is 30% and its cost of common equity capital is 12%. Calculate the company’s Weighted Average Costs of Capital for the following:

  1. Before the new bond issue
  2. After the new bond issue

Show work

Weighted Average Costs of Capital

"Looking for a Similar Assignment? Order now and Get a Discount!