Bayt.com

Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

A firm must raise $10 million dollars in funding for a capital investment project. $2 million will be raised by issuing debt?

with an interest rate of10% while the remainder will be raised by issuing stocks that will yield a return of12%. The firm's marginal tax rate is30%. What is the firm's composite cost of capital?

 a.15% 

 b.12% 

 c.11% 

 d.10% 

Logistics ERP Project Management Business Development Management
user-image
Question added by Emad Mohammed said abdalla , ERP & IT Software, operation general manager . , AL DOHA Company
Date Posted: 2015/08/05
Upvote (0) Views (9) Followers (7) Answers (7) Report Question
Write an Answer
Register now or log in to answer.
Ismael Hamad
by Ismael Hamad , Trainer , ANTONOIL DMCC , Lukoil project, WQ2

......................................c.11% ...............................................................

khaled elkholy
by khaled elkholy , HR MANAGER , misk for import & export

11 % is ......................right ..............................

Ramesh Sehgal
by Ramesh Sehgal , Chief Financial Officer , How United Services WLL

Answer is11% as only interest is tax deductible.

Formula will be :

2x10% x(1-.3) +8x12%=1.4+9.6=11%

 

Salvatore Augello
by Salvatore Augello , owner , A.S. Trade & Consult

answer C ________________________________________________________

Emad Mohammed said abdalla
by Emad Mohammed said abdalla , ERP & IT Software, operation general manager . , AL DOHA Company

  1. The correct answer was: c.11%. 

Yaqoub Alomar
by Yaqoub Alomar , Civil Engineer , Al-Zubeir municipality

Thanks for the invitation,

I agree with the experts 

Mohammed Asim Nehal
by Mohammed Asim Nehal , M Asim Nehal & Co , Chartered Accountants

It is11% ..................option c) is the correct answer,

Write Your Answer
More Questions Like This

Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.

Get Help