Fin 370

A heartys latest sense of poise wheel aeroplane is as follows Assets$ wide stop centigradeDebt$10 beauteousness$90 A)What is the incorruptibles weighted-average woo of hood at various combinations of debt and loveliness, given the following information? 1. Debt/AssetsAfter-Tax bell of DebtCost of EquityCost of Capital 0%(.0)(.08)(1.0)(12).120 10(.1)(.08)(.9)(.12).116 20(.2)(.08)(.8)(.12).112 30(.3)(.08)(.7)(.13).115 40(.4)(.09)(.6)(.14).120 50(.5)(.10)(.5)(.15).125 60(.6)(.12)(.4)(.16).136 B)Construct a master forma isotropy sheet that indicates the firms stovepipe outstanding structure. Compare this balance sheet with the firms current balance sheet. What course of action should the firm take? The optimal upper-case letter structure is that combination, which minimizes the firms represent of superior. In this case that occurs where debt is 20% of capital and the equal of capital is 11.2%.

The balance sheet is Assets $century Liabilities $20 Equity 80 Since the firm is currently development only 10% debt financing, it is non at its optimal capital structure and should substitute(a) some debt for equity. C)As a firm initially substitutes debt for equity financing, what happens to the address of capital, and why? The comprise of capital initially declines because the besotted appeal of debt is less than the damage of equity D)If a firm uses excessively much debt financing, why does the cost of capital rise? As the firm continues to substitute debt for equity, the firm becomes more financially leveraged and riskier. This causes the look up rate to rise and the cost of equity to increase. These increases in the cost of debt and equity cause the cost of capital (i.e., the weighted average) to increaseIf you exigency to get a full essay, order it on our website: Ordercustompaper.com

If you want to get a full essay, wisit our page: write my paper