Question

Question 6 (1 point) A firm has determined its target capital structure and it after-tax cost for each source of capital. What is the firm's weighted average cost of capital (WACC) (Enter your answers as a percentge rounded to 2 decimal places) Proportion 30% Cost 38 Source of Capital Long-term Debt (after taxes) Preferred Stock Common Stock 109 60% Your Answer: Answer

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS 10.30%

We know that:

$WACC = (W_D*K_d)+(W_p*K_p)+(W_e*K_e)$

Hence,

	Proportion	Cost	P*C
Debt	30%	3%	0.900%
Preferred Capital	10%	10%	1.000%
Common Stock	60%	14%	8.400%
WACC			10.30%

I hope this solves your doubt.

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