True or False: A Firm's capital structure has no impact on the firm's weighted average cost...

True or False: A Firm's capital structure has no impact on the firm's weighted average cost of capital

Solutions

Expert Solution

Answer : False.

Reason :

Weighted Average Cost of Capital is calculated by taking the cost of variors sources of finance proportionetly in weights of their capital structure.Therfore A Firm's capital structure impacts firm's weighted average cost of capital.

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the...

The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings...

The firm's weighted average cost of capital is 13% and it has $2550000 of debt at...

The firm's weighted average cost of capital is 13% and it has $2550000 of debt at market value and $510000 of preferred stock in terms of market value. The estimated free cash flow over next 5 years are in the table. Beyond 2024 to infinity, the firm expects its free cash flow to grow by 6% annually. 2020 - $250000, 2021 - $310000, 2022 - $380000, 2023 - $430000, 2024 - $470000 a. Estimate the value of the entire company...

What is a firm's weighted-average cost of capital if the stock has a beta of 1.5,...

What is a firm's weighted-average cost of capital if the stock has a beta of 1.5, Treasury bills yield 3%, and the market portfolio offers an expected return of 8%? Debt that has a yield to maturity of 7.5%. The firm is in the 25% marginal tax bracket. The cost of preferred stock is 8%. The following are the market values of 1) debt $8million, 2) preferred stock $6million. The company has 1,500,000 shares and the current market price of...

What is a firm's weighted-average cost of capital if the stock has a beta of 1.45,...

What is a firm's weighted-average cost of capital if the stock has a beta of 1.45, Treasury bills yield 5%, and the market portfolio offers an expected return of 14%? In addition to equity, the firm finances 30% of its assets with debt that has a yield to maturity of 9%. The firm is in the 35% marginal tax bracket.

What is a firm's weighted-average cost of capital if the stock has a beta of 2.45,...

What is a firm's weighted-average cost of capital if the stock has a beta of 2.45, Treasury bills yield 5%, and the market portfolio offers an expected return of 14%? In addition to equity, the firm finances 30% of its assets with debt that has a yield to maturity of 9%. The firm is in the 35% marginal tax bracket. A proposed capital project will cost $20 million and generate $4 million annually in after-tax cash flows for 6 years....

What is a firm's weighted-average cost of capital if the stock has a beta of 1.1,...

What is a firm's weighted-average cost of capital if the stock has a beta of 1.1, Treasury bills yield 4%, and the market portfolio offers an expected return of 16%? In addition to equity, the firm finances 70% of its assets with debt that has a yield to maturity of 10%. The firm is in the 35% marginal tax bracket.

What is a firm's weighted-average cost of capital if the stock has a beta of 1.1,...

TRUE OR FALSE ______ 5. A firm’s “Weighted Average Cost of Capital” (WACC) typically increases as...

TRUE OR FALSE ______ 5. A firm’s “Weighted Average Cost of Capital” (WACC) typically increases as the volume of new capital raised within a given time period increases. ______ 6. Breakeven analysis is used to determine the level of operations necessary to cover all operating costs. ______ 7. An increase in either the firm’s fixed costs (FC) or its variable costs (VC) will cause the firm’s operating breakeven point (OBP) in “units” to decrease. ______ 8. In general, non-U.S. companies...

I. Explain the meaning of capital structure, cost of capital, and weighted average cost of capital...

I. Explain the meaning of capital structure, cost of capital, and weighted average cost of capital (WACC). II. Describe how capital structure and cost of capital affect the way that a company is valued by investors. III. Utilize vocabulary and explanations suitable for a non-expert in finance to understand the communication.

The firm's weighted-average cost of capital is likely to _________________ if debt financing is used to...

The firm's weighted-average cost of capital is likely to _________________ if debt financing is used to excess. Select one: A. increase B. decrease C. remain unchanged D. collapse

Subjects