Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 9, Problem 9.18P
Summary Introduction
To discuss:
Whether John should take a consolidated loan or continue with his 3 individual loans.
Introduction:
The weighted average cost of capital is defined as the expected average cost from the different forms of capital issued by a company. It can also be considered as the average cost of long-term financing of a firm. WACC is calculated as a weighted proportion of the cost of various components in the capital structure.
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Weighted average cost of capital Personal Finance Problem John Dough has just been awarded his degree in business. He has three education loans outstanding.
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with each loan are given in the following table:
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John can also combine the total of his three debts (that is, $64,000) and create a consolidated loan from his bank. His bank will charge an annual interest rate of 6.2%
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The weighted average annual interest rate on John's current loan portfolio is %. (Round to two decimal places.)
John should
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Weighted average cost of capital Personal Finance Problem John Dough has just been awarded his degree in business. He has three education loans
outstanding. They all mature in 5 years and he can repay them without penalty any time before maturity. The amounts owed on each loan and the annual interest rate
associated with each loan are given in the following table:
LOADING...
.
John can also combine the total of his three debts (that is, $64,000) and create a consolidated loan from his bank. His bank will charge an annual interest rate of
4.9%
for a period of 5 years. Should John do nothing (leave the three individual loans as is) or create a consolidated loan (the $64,000 question)?
Loan
Balance due
Annual
interest rate
1
$22,000
4.2%
2
$10,000
7.2%
3
$32,000
3.2%
LIU borrowed money to enhance the labs. The loan is $1 million for 3 years at 5% per year simple interest. How much is
the interest amount () LIU will repay at the end of 3 years?
Select one:
Oa $150000
Ob $199000
OCS175000
Oa S100000.
Chapter 9 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 9.1 - What is the cost of capital?Ch. 9.1 - Prob. 9.2RQCh. 9.1 - Prob. 9.3RQCh. 9.1 - What are the typical sources of long-term capital...Ch. 9.2 - Prob. 9.5RQCh. 9.2 - Prob. 9.6RQCh. 9.2 - Prob. 9.7RQCh. 9.3 - How would you calculate the cost of preferred...Ch. 9.4 - What premise about share value underlies the...Ch. 9.4 - How do the constant-growth valuation model and...
Ch. 9.4 - Why is the cost of financing a project with...Ch. 9.5 - Prob. 9.13RQCh. 9.5 - Prob. 9.14RQCh. 9.5 - Prob. 9.15RQCh. 9 - In the chapter opener you learned that Johnson ...Ch. 9 - Learning Goals 3, 4, 5, 6 ST9-1 Individual...Ch. 9 - Prob. 9.1WUECh. 9 - Prob. 9.2WUECh. 9 - Duke Energy has been paying dividends steadily for...Ch. 9 - Weekend Warriors Inc. has 35% debt and 65% equity...Ch. 9 - Oxy Corporation uses debt, preferred stock, and...Ch. 9 - Concept of cost of capital and WACC Mace...Ch. 9 - Prob. 9.2PCh. 9 - Before-tax cost of debt and after-tax cost of debt...Ch. 9 - Prob. 9.4PCh. 9 - The cost of debt Gronseth Drywall Systems Inc. is...Ch. 9 - After-tax cost of debt Bella Wans is interested in...Ch. 9 - Cost of preferred stock Taylor Systems has just...Ch. 9 - Cost of preferred stock Determine the cost for...Ch. 9 - Cost of common stock equity: CAPM Netflix common...Ch. 9 - Retained earnings versus new common stock Using...Ch. 9 - The effect of tax rate on WACC K. Bell Jewelers...Ch. 9 - WACC: Market value weights The market values and...Ch. 9 - WACC: Book weights and market weights Webster...Ch. 9 - WACC and target weights After careful analysis,...Ch. 9 - Cost of capital Edna Recording Studios Inc....Ch. 9 - Calculation of individual costs and WACC Dillon...Ch. 9 - Prob. 9.18PCh. 9 - Calculation of individual costs and WACC Lang...Ch. 9 - Weighted average cost of capital (WACC) American...Ch. 9 - Prob. 9.21PCh. 9 - Eco Plastics Company Since its inception, Eco...
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