Items 1 and 2 are based on the following information:
The following information is available for Lopinsky, Inc.:
|
Balance Sheet |
|||
|
Current assets |
$ |
500,000 |
|
|
Property, plant, & equipment |
4,000,000 |
||
|
Total assets |
$ |
4,500,000 |
|
|
Current liabilities |
$ |
30,000 |
|
|
Long-term debt |
2,500,000 |
||
|
Common stock |
200,000 |
||
|
Retained earnings |
1,770,000 |
||
|
Total liabilities and stockholders’ equity |
$ |
4,500,000 |
|
|
Cost of debt before tax |
7% |
||
|
Cost of equity |
12% |
||
|
Tax rate |
25% |
||
What is Lopinsky’s weighted-average cost of capital?
- 9.50%
- 8.75%
- 8.22%
- 6.10%
What is Lopinsky’s debt-to-equity ratio?
- 1.28
- 0.56
- 1.20
- 2.10