Author Question: Near-cash assets consist of marketable securities and accounts receivable. Indicate whether the ... (Read 172 times)

ARLKQ · **on:** Jul 10, 2018

Near-cash assets consist of marketable securities and accounts receivable.

Indicate whether the statement is true or false

Question 2

Baxter Inc has a target capital structure of 30 debt, 15 preferred stock, and 55 common equity.

The company's after-tax cost of debt is 7, its cost of preferred stock is 11, its cost of retained
earnings is 15, and its cost of new common stock is 16. The company stock has a beta of 1.5 and
the company's marginal tax rate is 35. What is the company's weighted average cost of capital if
retained earnings are used to fund the common equity portion?
A) 13.80 B) 11.20 C) 12.00 D) 14.45