A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total...

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A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total...

A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total common equity. The tax rate s 40%. Cost of debt is equal to 6%, cost of preferred stock is equal to 7.5%, and cost of equity is equal to 12%.

If there target capital structure is 30% debt, 5% preferred stock, and 65% common stock, what is the WACC it should use to evaluate future projects?

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Answer 1

Answer #1

market value weights 30% cost of capital 3.60% [ 6% x (1-0.30) ] 7.50% 12.00% Particulars Debt weighted cost 0.01080 Preferre

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Answer 2

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A Corp's balance sheet shows $250M in debt, $50M in preferred stock, and $300M in total...