Calculate barbows after-tax weighted average cost of capital

Reference no: EM13336369

Barbow Enterprises, Inc., is considering an expansion in their operations. One of the first items they want to examine is their cost of capital. According to the accounting department, the following items and their respective costs have been identified:

The cost of Common Equity: 15%
The before tax cost of debt: 12%
No Preferred stock
They have also calculated the marginal tax rate to be 40% and the stock sells at its book value.

Barbow Enterprises Inc.
Balance Sheet
Assets		Liabilities and Owners' Equity

Cash	$240	Long Term Debt	$2,304
Accounts Receivable	480	Equity	3,456
Inventories	720
Net P&E	4,320
Total Assets	$5,760	Total Liabilities and owners' Equity	$5,760

Calculate Barbow's after-tax weighted average cost of capital, using the data in the balance sheet above.

Deliverable:. Use a Microsoft Excel spreadsheet that illustrates your calculations. You may use the formulas embedded in Microsoft Excel and/or a financial calculator for these calculations.

Reference no: EM13336369

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