Business, 19.07.2021 19:40 Blut07ilove

Calculating Weighted Average Cost of Capital and Economic Value Added (EVA) Ignacio, Inc., had after-tax operating income last year of $1,196,500. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 million in common stock, which was considered to be relatively risky (with a risk premium of 8 percent). The rate on long-term treasuries is 4 percent. Ignacio, Inc., pays a marginal tax rate of 30 percent.
Required:
Calculate the after-tax cost of each method of financing. Enter your answers as decimal values rounded to three places. For example, 4.36% would be entered as ".044".
Mortgage bonds
Unsecured bonds
Common stock

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Calculating Weighted Average Cost of Capital and Economic Value Added (EVA) Ignacio, Inc., had afte...

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