What is the weight-average cost of Capital for a corporation given the following Weights and Sources...
What is the weight-average cost of Capital for a corporation
given the following Weights and Sources of Capital?
Sources of CapitalWeightsCost of Capital
Sources of Capital Weights Cost of Capital
Long-term Debt 50% 5.6%
Preferred Stock Equity 10% 6.0%
Common Stock Equity 40% 14.0%
|
A. 9.8% |
||
|
B. 9.6% |
||
|
C. 9.0% |
Homework Answers
Answer
- Correct Answer = Option ‘C’ 9.0%
- Calculation
= (50 x 5.6%) + (10 x 6%) + (40 x 14%)
= 2.8 + 0.6 + 5.6
= 9%
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