What wold be the company Weighted Average Cost of Capital based on the following Optimal proportions...
What wold be the company Weighted Average Cost of Capital based on the following
Optimal proportions are 40% Debt, 10% Preferred, and 50% Common Equity Retained Earnings = $400,000 Tax = 40% Value of Cost of Debt (kd) = 10% Value of Cost of Preferred stock (Kps) = 9% Value of Cost of Equity (ke) = 14%
Homework Answers
After-tax cost of debt=10*(1-tax rate)
=10*(1-0.4)=6%
WACC=Respective costs*Respective weight
=(0.4*6)+(0.1*9)+(0.5*14)
=10.3%
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What wold be the company Weighted Average Cost of Capital based
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