Capital structure decisions refer to the: What appears to be the targeted debt ratio of a firm that issues $15 million in bonds and $35 million in equity to finance its new capital projects? To calculate the present value of a business, the firm's free cash flows should be discounted at the firm's: The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8% pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be: The weighted-average cost of capital for a firm with a 40/60 debt/equity split, 8% cost of debt, 15% cost of equity, and a 34% tax rate would be: Why is debt financing said to include a tax shield for the company? What is the pretax cost of debt for a firm in the 35% tax bracket that has a 10% aftertax cost of debt? How much is added to a firm's weighted-average cost of capital for 45% debt financing with a required rate of return of 10% and a tax rate of 35%? What is the WACC for a firm with 50% debt and 50% equity that pays 12% on its debt, 20% on its equity, and has a 40% tax rate? Company X has 2 million shares of common stock outstanding at a book value of $2 per share

1. Capital structure decisions refer to the:

blend of equity and debt used by the firm

2. What appears to be the targeted debt ratio of a firm that issues $15 million in bonds and $35 million in equity to finance its new capital projects?

30%

3. To calculate the present value of a business, the firm's free cash flows should be discounted at the firm's:

weighted-average cost of capital

4. The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8% pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be:

8.63%

5. The weighted-average cost of capital for a firm with a 40/60 debt/equity split, 8% cost of debt, 15% cost of equity, and a 34% tax rate would be:

11.11%

6. Why is debt financing said to include a tax shield for the company?

Taxable income is reduced by the amount of the interest

7. What is the pretax cost of debt for a firm in the 35% tax bracket that has a 10% aftertax cost of debt?

15.38%

8. How much is added to a firm's weighted-average cost of capital for 45% debt financing with a required rate of return of 10% and a tax rate of 35%?

2.93%

9. What is the WACC for a firm with 50% debt and 50% equity that pays 12% on its debt, 20% on its equity, and has a 40% tax rate?

13.6%

10. Company X has 2 million shares of common stock outstanding at a book value of $2 per share. The stock trades for $3 per share. It also has $2 million in face value of debt that trades at 90% of par. What is the weight of debt for WACC purposes?

23.08%