Frank Fabrications have a target capital structure of 70% debt and 30% equity. The yield to maturity on the companies bo
Posted: Thu May 19, 2022 10:57 am
Frank Fabrications have a target capital structure of 70% debt
and 30% equity. The yield to maturity on the companies bonds is 6%.
The cost of equity for Frank Fabrications is currently 14%.
Calculate the weighted average cost of capital for
Frank Fabrications:
(a) Under the assumption that there is no taxation [3 marks]
(b) When the corporate taxation rate is 25% [4 marks]
(c) If the balance ot debt to equity changes to 50% debt
and 50% equity and the corporate taxation rate remains 25%
and 30% equity. The yield to maturity on the companies bonds is 6%.
The cost of equity for Frank Fabrications is currently 14%.
Calculate the weighted average cost of capital for
Frank Fabrications:
(a) Under the assumption that there is no taxation [3 marks]
(b) When the corporate taxation rate is 25% [4 marks]
(c) If the balance ot debt to equity changes to 50% debt
and 50% equity and the corporate taxation rate remains 25%