Targaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock,...

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Targaryen Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent de

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Answer 1

Answer #1

1)

WACC = Weights * costs

WACC = 0.7*0.1 + 0.25*0.06*(1 - 0.23) + 0.05*0.05

WACC = 0.07 + 0.01155 + 0.0025

WACC = 0.0841 or 8.41%

2)

Cost of debt = 0.06*(1 - 0.23)

Cost of debt = 0.0462 or 4.62%

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Answer 2

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