Homework Answers
After Tax cost of Debt =YTM (1- Tax Rate )
= 6.6% * ( 1 - 0.4)
= 6.6% * 0.6
= 3.96%
WACC is weighted Avg cost of sources in capital structure.
| Source | Inv ( in M) | Weight | Cost | Wtd Cost |
| Debt | $ 14.40 | 0.4675 | 3.96% | 1.85% |
| Preferred Stock | $ 3.20 | 0.1039 | 9.50% | 0.99% |
| Equity | $ 13.20 | 0.4286 | 14.30% | 6.13% |
| WACC | 8.97% | |||
WACC is 8.97%
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