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problem: The capital structure of Dartex Industries and the pretax cost of capital for each component are shown in the table below. Determine Dartex's weighted average cost of capital if the marginal tax rate is 34%.

Dartex Industries [figures in $000s]

Component

Value

Cost of Capital

Bonds

$2,000

7.50%

Preferred stock

$1,000

15.00%

Common stock

$5,000

20.00%

Total

$8,000

 

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M916175

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