5111 Unit 7 Discussion Assignment answer key
Before New Debt Issued Debt Common Stock Preferred Stock
Weight in the capital structure 52.17% 26.09% 21.74%
Amount 12,000,000 6,000,000 5,000,000
Cost (coupon rate) 5.00% 10% 5.00%
Tax rate 33% 33% 33%
Tax Shield Yes No No
Weighted average cost of Capital 1.75% 2.61% 1.09%
After New Debt Issued Debt Common Stock Preferred Stock
Weight in the capital structure 36.36% 18.18% 15.15%
Amount 12,000,000 6,000,000 5,000,000
Cost 5.00% 10% 5.00%
Tax rate 33% 33% 33%
Tax Shield Yes No No
Weighted average cost of Capital 1.22% 1.82% 0.76%
In this calculation, EXCEL Formulas are utilized. NOTE: Rounding at various decimal places will result
Click on specific boxes to view its corresponding formula.
The weighted average cost of capital (Rwacc = E/(E+D) rE + D/(E+D) rD(1-τc)) formula can be utilized o
Before New Debt Issued
Capital structure of $12 million in bonds which pay a 5% coupon.
$5 million in preferred stock with a par value of $35 per share and an annual dividend of $1.75 per shar
Common stock with a book value of $6 million. The cost of capital associated with the common stock is
Marginal tax rate for the firm is 33%.
After New Debt Issued
Another public debt offering (corporate bonds) in the amount of $10 million at par ($35) with a 4% coup
Before New Debt Issued Debt Common Stock Preferred Stock
Weight in the capital structure 52.17% 26.09% 21.74%
Amount 12,000,000 6,000,000 5,000,000
Cost (coupon rate) 5.00% 10% 5.00%
Tax rate 33% 33% 33%
Tax Shield Yes No No
Weighted average cost of Capital 1.75% 2.61% 1.09%
After New Debt Issued Debt Common Stock Preferred Stock
Weight in the capital structure 36.36% 18.18% 15.15%
Amount 12,000,000 6,000,000 5,000,000
Cost 5.00% 10% 5.00%
Tax rate 33% 33% 33%
Tax Shield Yes No No
Weighted average cost of Capital 1.22% 1.82% 0.76%
In this calculation, EXCEL Formulas are utilized. NOTE: Rounding at various decimal places will result
Click on specific boxes to view its corresponding formula.
The weighted average cost of capital (Rwacc = E/(E+D) rE + D/(E+D) rD(1-τc)) formula can be utilized o
Before New Debt Issued
Capital structure of $12 million in bonds which pay a 5% coupon.
$5 million in preferred stock with a par value of $35 per share and an annual dividend of $1.75 per shar
Common stock with a book value of $6 million. The cost of capital associated with the common stock is
Marginal tax rate for the firm is 33%.
After New Debt Issued
Another public debt offering (corporate bonds) in the amount of $10 million at par ($35) with a 4% coup
