ABC Corp has a target capital structure of 30% Debt, 20% Preferred Equity and 50% Common Stock. (1) ABC Corp had a 4.5%...

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ABC Corp has a target capital structure of 30% Debt, 20% Preferred Equity and 50% Common Stock. (1) ABC Corp had a 4.5%...

ABC Corp has a target capital structure of 30% Debt, 20% Preferred Equity and 50% Common Stock.
(1) ABC Corp had a 4.5% after tax cost of debt.
(2) ABC Corp has a 5% Cost of preferred equity
(3) ABC Corp has a 8% cost of Common equity.
Calculate ABC Corps WACC.?

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Answer 1

Answer #1

WACC = Weights*costs

WACC = 0.3*0.045 + 0.2*0.05 + 0.5*0.08

WACC = 0.0135 + 0.01 + 0.04

WACC = 0.0635 or 6.35%

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Answer 2

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