You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt,...

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You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt,...

You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred stock, and 45% common equity. The cost of debt is 9.00%, cost of preferred stock is 7%, and cost of common equity is 12.75%. The tax rate is 40%. What is its WACC?

A)

8.73%

B)

8.95%

C)

9.12%

D)

8.81%

E)

8.68%

business finance

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Answer 1

Answer #1

Particulars Debt market value weights 40% weighted cost 2.16% cost of capital 5.40% [9% x 0.60 ] 7.00% 12.75% Preferred stock

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Answer 2

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You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt,...

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You were hired as a consultant to Giambono Company, whose target capital structure is 40%...

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