The fontenot company's cost of common equity is 13 percent, its before tax cost of debt is 8 percent and its marginal tax rate is 40 percent. Given Fontenot's market value capital structure below, calculate its WACC.
Long-term debt $10,000,000
common equity 20,000,000
total capital $30,000,000
A. 10.27%
B. 9.73%
C. 6.8%
D. 11.33%
E. 8.90%
The fontenot company's cost of common equity is 13 percent, its before tax cost of debt is 8 percent and its marginal tax rate is 40 percent. Given Fontenot's market value capital structure below, calculate its WACC.
Long-term debt $10,000,000
common equity 20,000,000
total capital $30,000,000
A. 10.27%
B. 9.73%
C. 6.8%
D. 11.33%
E. 8.90%
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| Current assets | $30,000,000 | Current liabilities | $20,000,000 | |||
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| Long-term debt | 30,000,000 | |||||
| Common stock (1 million shares) | 1,000,000 | |||||
| Retained earnings | 39,000,000 | |||||
| Total assets | $100,000,000 | Total liabilities and equity | $100,000,000 |
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| Short-term debt | $ | % | ||
| Long-term debt | ||||
| Common equity | ||||
| Total capital | $ | % |
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| Current assets | $30,000,000 | Current liabilities | $20,000,000 | |||
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| Common stock (1 million shares) | 1,000,000 | |||||
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| Short term debt $________________ %__________________ Long-term debt _________________ ___________________ Common equity _________________ ___________________ Total capital $________________ %_________100_______ | ||||
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Suppose the Schoof Company has this book value balance sheet:
| Current assets | $30,000,000 | Current liabilities | $20,000,000 | |||
| Fixed assets | 70,000,000 | Notes payable | $10,000,000 | |||
| Long-term debt | 30,000,000 | |||||
| Common stock (1 million shares) | 1,000,000 | |||||
| Retained earnings | 39,000,000 | |||||
| Total assets | $100,000,000 | Total liabilities and equity | $100,000,000 |
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Short-term Debt $_____________ _______________%
Long-term Debt $_____________ _______________%
Common Equity $_____________ _______________%
Total Capital $_____________ _______________%
