Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects...

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Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable gr

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Answer 1

Answer #1

Before Tax Cost of capital from Bond= 6%

After-Tax Cost of capital from Bond= 5% ( 4%(1-25%)+2%)

Cost of Capital from Preffered Stock=8.74% ( 0.9/10.3)

Cost of capital form common stock=6.86% (3.5/51)

WACC

((5%*100*10200)+(100000*10.3*8.74%)+(20000*51*6.86%))/((100*10200)+(100000*10.3)+(20000*51))=6.87%

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Answer 2

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