Examlex
The weighted average cost of capital for firm X is currently 10%.Firm X is considering a new project but must raise new debt to finance the project.Debt represents 25% of the capital structure.If the after tax cost of debt will rise from 7% to 8%,what is the marginal cost of capital?
Market Rate
The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.
Contract Rate
The predetermined fee or rate agreed upon in a contract for services rendered or goods sold.
Bonds
Long-term debt securities issued by corporations or governments to raise capital, paying interest to holders.
Premium
A term that records the sale of stock at more than par value. In this book we use the account Paid-In Capital in Excess of Par to record the premium received.
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