Given the following information: 50% debt 5% preferred stock 55% common equity 6% after-tax cost of...
Given the following information:
50% debt
5% preferred stock
55% common equity
6% after-tax cost of debt
10% cost of preferred stock
13.5% cost of common equity
What is the weighted average cost of capital, rounded to the nearest whole number? - 13% - 8% - 11% - 0%
Homework Answers
Answer is 11%
Weight of Debt = 50%
After-tax Cost of Debt = 6%
Weight of Preferred Stock = 5%
Cost of Preferred Stock = 10%
Weight of Common Equity = 55%
Cost of Common Equity = 13.50%
WACC = Weight of Debt * After-tax Cost of Debt + Weight of
Preferred Stock * Cost of Preferred Stock + Weight of Common Equity
* Cost of Common Equity
WACC = 0.50 * 6.00% + 0.05 * 10.00% + 0.55 * 13.50%
WACC = 11%
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