The Following Financial Statement Data Pertains to Northridge, Inc Required:
A

question 34

Essay

The following financial statement data pertains to Northridge, Inc., a manufacturer of women's outerware (dollar amounts in millions):
$\begin{array}{llcc} \text { Total Assets }& \$145,782& \\ \text { Interest-Bearing Debt } &\$32,659\\ \text { Average Pre-tax borrowing cost } &8.25\%\\ \text {Common Equity: } &\\ \text { Book Value } &\$22,515\\ \text {Market Value } &\$65,843\\ \text {Income Tax Rate } &40\%\\ \text { Market Equity Beta} &0.85\\ \text {Market Premium } &7.5\%\\ \text { Risk-free interest rate } &2.2\%\\\end{array}$
Required:
a. Calculate the company's cost of equity capital.
b. Calculate the weight on debt c apital that should be used to determine Notthidge's weighte ch average cost of capital
c. Calculate the weight on equity capital that should be used to determine Northridge's weighted-average cost of capital.
d. Calculate Northricge's weighted-average cost of capital.

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Definitions:

Entrepreneurs

Individuals who create, organize, and manage a business venture, taking on financial risks in the hope of profit.

American Entrepreneur

An American entrepreneur is an individual in the United States who starts and manages a business venture, taking on financial risks in the hope of profit.

Economic Success

The achievement of desired financial outcomes and growth in an economy, often measured by indicators such as GDP growth, employment rates, and living standards.

Innovator

A person or organization that introduces new ideas, products, or methods, leading to change or development in a particular field.