Consider a company financed with 0.9 equity, 0.1 preferred stock, and the remaining debt subject to...
Consider a company financed with 0.9 equity, 0.1 preferred stock, and the remaining debt subject to a corporate tax rate 0.5 If the required rate of return on the debt is 0.03, on the preferred stock is 0.10 and on the common stock is 0.09, what is the working average cost of capital for this company?
Homework Answers
Working average cost of capital = (Weight of equity * Cost of equity) + (Weight of preferred stock * Cost of preferred stock) + [Weight of debt * Cost of debt(1 - Tax)]
Working average cost of capital = (0.9 * 0.09) + (0.1 * 0.10) + [0.0 * 0.03(1 - 0.50)]
Working average cost of capital = 0.091
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Consider a company financed with 0.9 equity, 0.1 preferred
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