FIN 486 CART Become Exceptional--fin486cart.com FIN 486 Entire Course | Page 19

Explain which income statement and balance sheet items you
assumed were variable instead of fixed. Format your paper consistent
with APA guidelines. Click the Assignment Files tab to submit your
assignment.
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FIN 486 Week 3 Team Assignment
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a) Calculate the after-tax cost of debt b) Calculate the cost of
preferred stock c) Calculate the cost of retained earnings
d)
calculate the cost of common stock
e) calculate the firms weighted
average cost of capital using retained earnings and the capital
structure weights
f) calculate the firms weighted average cost of
capital using new common stock and the capital structure weights a.
Cost of debt:
Proceeds from sale of $1,000 par value bond:
b.
Cost of preferred stock: rp = Dp ÷ Np c. Cost of common stock: rj =
RF + [bj × (rm − RF)] d. Weighted average cost of capital: ra = (wi ×
ri) + (wp × rp) + (ws × rn) e. 1. Change in risk Premium: Change in
beta × market risk premium Note: 17.5% − 15.7% = 1.8%
2.
Revised weighted average cost of capital: ra = (wi x ri) + (ws x rn)
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FIN 486 Week 3 Video Summary Short Term Finance
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