Chapter 12 Homework Answers

Chapter 12 Homework Answers - Therefore, the firm should...

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CHAPTER 12 THE COST OF CAPITAL SOLUTIONS TO PROBLEMS: 6. a. k e = 13.4% = k a in the all equity case. b. New k e = 14.6% New k a = 12.32% The weighted cost of capital for Wentworth declines from 13.4% in the all equity case to 12.32% if debt is introduced into the capital structure.
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Unformatted text preview: Therefore, the firm should consider altering its capital structure to include debt. 7. Cost of debt: k d = 4.1% k p = 7.5% k a = 9.4% 10. k i = k d = 8.4% k a = 14.8% 25. k d = 5.3% k p = 6.5% k e .131or 13.1% k a = 9.7% 88...
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