Question

Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the following proportions: debt, 50% preferred stock, 13%, and common stock, 37%. If the cost of debt is 6.1%, preferred stock costs 9.2%, and common stock costs 11.2%, what is Oxy's weighted average cost of capital (WACC)? Oxy's weighted average cost of capital (WACC) is % (Round to two decimal places.)

Answer 1

Oxy Corporation Weight of debt Weight of preferred stock Weight of common stock 50% 13% 37% Cost of debt Cost of preferred stock Cost of common stock 6.10% 9.20% 11.20% WACC 8.39%

Formulae

A B 0.5 0.13 0.37 1861 Oxy Corporation 1862 1863 Weight of debt 1864 Weight of preferred stock 1865 Weight of common stock 1866 1867 Cost of debt 1868 Cost of preferred stock 1869 Cost of common stock 1870 1871 WACC 0.061 0.092 10.112 =B1863*B1867 +B1864*B1868 +B1865*B1869