Question

elf-Study Problem 13.04

Cullumber’s T-Shirts, Inc., has debt claims of $220 (market value) and equity claims

of $780 (market value). If the after-tax cost of debt financing is 9 percent and the cost of equity is 15 percent, what is Cullumber’s weighted average cost of capital? (Round answer to 2 decimal places, e.g. 15.25%.)

Weighted average cost of capital

%

Financial Accounting