Weight of equity = E/A |
Weight of equity = |
W(E)=0.6 |
Weight of debt = D/A |
Weight of debt = 0.35 |
W(D)=0.35 |
Weight of preferred equity =1-D/A-E/A |
Weight of preferred equity = =1-0.35 - 0.6 |
W(PE)=0.05 |
b. After tax cost of debt = cost of debt*(1-tax rate) |
b. After tax cost of debt = 6*(1-0.22) |
b. = 4.68 |
a. WACC=after tax cost of debt*W(D)+cost of equity*W(E)+Cost of preferred equity*W(PE) |
a. WACC=4.68*0.35+10*0.6+5*0.05 |
a. WACC =7.89% |
HW CH 14 Saved 7 Targaryen Corporation has a target capital structure of 60 percent common...
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