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Homework answers / question archive / Jon Stark ,Inc
Jon Stark ,Inc. Has estimated the costs of debt and equity capital for various proportions of debt in its capital structure.
|
% of Debt |
Cost of Debt |
Cost of Equity |
|
0% |
- |
13.0% |
|
10% |
5.4% |
13.3 |
|
20% |
5.6 |
13.8 |
|
30% |
5.8 |
14.4 |
|
40% |
6.3 |
15.2 |
|
50% |
7.0 |
16.0 |
|
60% |
8.2 |
17.0 |
WEIGHTED AVERAGE COST OF CAPITAL = WEIGHT OF DEBT X COST OF DEBT + WEIGHT OF EQUITY X COST OF EQUITY
| % of Debt | Cost of Debt | Cost of Equity | WACC |
| 0% | - | 13 | 13.000 |
| 10% | 5.4 | 13.3 | 12.51 |
| 20% | 5.6 | 13.8 | 12.16 |
| 30% | 5.8 | 14.4 | 11.82 |
| 40% | 6.3 | 15.2 | 11.64 |
| 50% | 7 | 16 | 11.5 |
| 60% | 8.2 | 17 | 11.72 |
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