Author Question: What is the weighted average cost of capital after taxes if the desired capital structure is 40% ... (Read 438 times)

dejastew · **on:** Apr 25, 2021

Question 1

What is the weighted average cost of capital after taxes for Moss Diet Centers if the target weights are 25% equity and 75% debt, and the costs of equity and after-tax debt are 15% and 12%, respectively? Assume the relevant tax rate is 20%.
◦ 12.5%
◦ 11.0%
◦ 12.8%
◦ 14.0%
◦ 13.5%

Question 2

What is the weighted average cost of capital after taxes if the desired capital structure is 40% debt and 60% equity, investors require a 10% pre-tax return from debt and 25% from equity, and the tax rate is 30%?
◦ 18%
◦ 20%
◦ 11%
◦ 15%
◦ 19%

lorealeza · **Reply #1 on:** Apr 25, 2021

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