Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions):
Assume that Zolar is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure with that has 70 percent debt with a pre tax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zolar based on the new capital structure.
A) 20.63%
B) 12.56%
C) 13.01%
D) 9.94%

Question

Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions):
 Assume that Zolar is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure with that has 70 percent debt with a pre tax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zolar based on the new capital structure.
A) 20.63% 
B) 12.56% 
C) 13.01% 
D) 9.94%

Quizplus · Accepted Answer

The Answer of Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions):
 Assume that Zolar is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure with that has 70 percent debt with a pre tax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zolar based on the new capital structure.
A) 20.63% 
B) 12.56% 
C) 13.01% 
D) 9.94%