The M&M Company is financed by $4 million (market value)in debt and $6 million (market value)in equity.The cost of debt is 5% and the cost of equity is 10%.Calculate the weighted average cost of capital.(Assume no taxes.)

Question

Quizplus · Accepted Answer

Weighted Average Cost of Capital = (Cost of Debt * Market Value of debt / Total market value) + (Cost of Equity * Market Value of equity / Total market value)

= (0.05 * 4 / 10) + (0.1 * 6 / 10)

= 0.02 + 0.06

= 0.08 or 8%

The M&M Company Is Financed by $4 Million (Market Value)in