I need help figuring oht the wrong answers Example: Gainer...
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I need help figuring oht the wrong answers
Example: Gainer Company has three sources of financing: $3 million of mortgage bonds paying 5 percent interest, $2.5 million of unsecured bonds paying 8 percent interest, and $4.5 million of common stock, which is considered to be of average risk (with a 6 percent premium). The company's tax rate is 40 percent and the rate of interest on long-term government bonds is 3 percent. Last year, Gainer Company had after-tax income of $768,000. Fill in the following table to calculate the weighted average percent cost of capital. (Round all decimals to four significant digits.) Amount Percent After-Tax Cost Weighted Cost Mortgage bonds $3,000,000 30 X 3 x 0.90 X Unsecured bonds 2,500,000 25 X 4.8 X 1.20 x Common 4,500,000 45 X 9 X 4.05 x stock Total 10,000,000 6.15 x The weighted average percent cost of capital is 0.0615 or 6.15 %. Total cost of capital employed is $ 615,000 V. EVA is $ 153,000. Gainer Company is creating wealth. If Gainer Company's tax rate was 30 percent
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