9. WEIGHTED AVERAGE COST OF CAPITAL (2) The Eldrigde Manufacturing Company pays an interest rate of 11% of its bonds, th

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9 Weighted Average Cost Of Capital 2 The Eldrigde Manufacturing Company Pays An Interest Rate Of 11 Of Its Bonds Th 1 (24.21 KiB) Viewed 42 times

9. WEIGHTED AVERAGE COST OF CAPITAL (2) The Eldrigde Manufacturing Company pays an interest rate of 11% of its bonds, the marginal income tax rate of the firm is 40%, the rate on government bonds is 7.5%, the return on all stocks in the market is 11.5%, the estimated beta coefficient of the firm is 2.0, and the firm wishes to raise 40% of its capital by borrowing. Determine the cost of debt, the cost of equity, and the composite cost of capital for the firm - that is, the composite marginal cost of capital that should be used to evaluate investment projects open to the firm.