Question

General Talc Mines has compiled the following data regarding the marker value and cost of the specific sources of capital. Market price per share of common stock-$50. Market value of long-term debt-$980 per bond.

The weighted average cost of capital using market value weights is: ________.
A- 11.7%
B- 13.5%
C- 15.8%
D- 17.5%
E- 14.4%

Answer 1

To calculate the weighted average cost of capital, consider the market value and weight of each source of capital, and then sum up the products.

Step-by-step explanation:

To calculate the weighted average cost of capital using market value weights, we need to consider the market value of each source of capital and its respective weight in the overall capital structure. Given the market price per share of common stock is $50 and the market value of long-term debt is $980 per bond, we can calculate the weights as follows:

• Weight of common stock = Market value of common stock / Total market value of capital
• Weight of long-term debt = Market value of long-term debt / Total market value of capital

Once the weights are calculated, we can multiply each source's cost by its respective weight and sum them up to obtain the weighted average cost of capital.

The correct answer is B- 13.5%.

Answer 2

D- 17.5%

Step-by-step explanation:

Hi your question was incomplete see the attached full question as an image

The Average Cost of Capital is the return that is required by providers of Long term Permanent Sources of Finance

WACC = 8% × 0.05 + 19% × 0.95

= 18 %