Answered

Explore a wide range of topics and get answers from experts on IDNLearn.com. Our experts provide prompt and accurate answers to help you make informed decisions on any topic.

You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt. The cost of debt capital is 8 percent, while the cost of equity capital is 20 percent for the firm. What is the overall cost of capital for the firm? Select one: O a. 12.2% b. 15.8 % c. None of these O d. 20.2%

Sagot :

15.8 % will be the overall cost of capital for the firm at 8% debt capital and 20% equity capital.

Weight of equity = 65%

Cost of Capital of equity = 20%

overall cost of equity = Weight of equity x Cost of Capital of equity

                                   =  65% x 20%

                                   = 13%

Weight of debt= 35%

Cost of Capital of debt = 8%

overall cost of debt = Weight of debt x Cost of Capital of debt

                                 = 35% x 8%

                                 = 2.80%

overall cost of capital for the firm = overall cost of equity + overall cost of  

                                                                                                    debt

                                                        = 13% + 2.80%

                                                        = 15.8%

the overall cost of capital for the firm is 15.8%

learn more about cost of capital here

https://brainly.com/question/16031467

#SPJ4

Thank you for using this platform to share and learn. Don't hesitate to keep asking and answering. We value every contribution you make. IDNLearn.com provides the answers you need. Thank you for visiting, and see you next time for more valuable insights.