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  1. business
  2. accounting
  3. a company has the following capital structure:debt

A company has the following capital structure:Debt: $500,000 at 6% interestPreferred stock: $200,000 at 8%...

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Accounting

A company has the following capital structure:

  • Debt: $500,000 at 6% interest
  • Preferred stock: $200,000 at 8% dividend
  • Common equity: $300,000 with a cost of 10%
Requirements:(a) Calculate the cost of each component of capital. (b) Determine the weighted average cost of capital (WACC). (c) Analyze the impact of WACC on investment decisions. (d) Discuss the factors affecting the cost of capital.

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