A firm’s capital portfolio consists of 15% loans, 15% bonds, 50% common stock, and 20% retained earnings. The loans have
Posted: Fri Jul 01, 2022 7:40 am
A firm’s capital portfolio consists of 15% loans, 15% bonds, 50%common stock, and 20% retained earnings. The loans have an annualbefore-tax effective rate of 8%, the bonds have an annualbefore-tax effective rate of 8%, the common stock has an after-taxcost of capital of 12%, and the firm’s income tax rate is 40%. Whatis its after-tax cost of capital?