Business & Finance homework help. instructions
After financing the expansion, 60 percent of BlueVal’s capital equity has an estimated cost of 22.5 percent. 40 percent of BlueVal’s capital comes from debt, with half at an interest rate of 10 percent (mortgage rate) and half at 8 percent for the proposed new line of credit. The cost of debt is lower than expected because of the 34 percent expected tax savings.
The following table illustrates BlueVal’s capital structure—pre and post financing:
| Capital Transaction as of December 31, 2010 (In US Dollars) | Proposed New Financing (In US Dollars) | Total After New Financing (In US Dollars) | |
| Shareholders’ Equity | 1,726,883 | 800,000 | 2,526,883 |
| Mortgage Outstanding | 900,000 | 900,000 | |
| Credit Line | 800,000 | 800,000 | |
| Total Capital | 2,626,883 | 1,600,000 | 4,226,883 |
Considering the above information and the case study for this week, complete the following:
- Weight the individual capital source costs by their percentage in the company’s total capital structure.
- Explain your weightages.
Support your statements with appropriate examples and scholarly references.
Present your calculations in Excel spreadsheet format or in Word format. Write the explanation of your calculations in a 1–2-page paper in Word format. Apply APA standards to citation of sources.
You have use the case study and the book is :
Besley, S., & Brigham, E.F. (2008). Essentials of managerial finance with Thomson one (1
4
th
ed.). Mason,
OH: Thomson Learning. Jacobs, F.R, Chase, R.B., & Aquilano, , N.J
