Question

Cost of Equity 5% Cost of debt 7% % Debt 60% % Equity 40% Given the data in the above table, what is the weighted average cost of capital of this company?

Answer 1

Weighted Average Cost of Capital (WACC) gives the relative proportions of various sources of capital.

Explanation:

The mix of capital is important in a long run. A firm should select the mix by which the per share value can be increased. Optimal capital structure is a best solution.

By applying given data Cost of Equity - 40 % Cost of Debt - 60%

Cost of Equity with 40% proportion and 5% cost:

⇒0.4 x 0.05 = 0.020

Cost of Debt with 60% proportion and 7% cost

⇒10.6 x 0.07 = 0.042

WACC = 0.020 + 0.042 = 0.062 or 6.2%

In financial management what is Weighted Average Cost of Capital?

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Answer 2

. 9Answer:
5
5
Explanation: