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Turner’s pharmacy has a rate of equity of 9.5%, a rate of preferred stock of 8.25%,...

Turner’s pharmacy has a rate of equity of 9.5%, a rate of preferred stock of 8.25%, and a rate of debt (before tax) of 7% percent. They have 100,000 bonds outstanding with a face value of $1,000 each, selling for 95% of face value. They also have 2,000,000 shares of common stock outstanding with a current price of $37 a share. There are 45,000 shares of preferred stock outstanding at a market price of $41 a share. The company's tax rate is 32%. What is the weighted average cost of capital for Turner’s pharmacy? I know the answer is 6.85%, I am looking for how to solve.

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Answer #1

-+C8/$C$17 D8 A C D E WACC (Cost %xWeights) Weights 7 Cost % Market value 8 Common equity 9.50% 74,000,000 4.11% 0.4331 -2000

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