Question

MicroTech Corporation is subject to a 35% income tax rate. Given the following information about the firm’s capital structure, calculate the corporation’s weighted-average cost of capital (WACC): (Do not round intermediate calculations. Round your answers to 2 decimal places. (i.e. 0.1234 = 12.34%).)

Source of Funds		Market Value				After-Tax Rate or Expected Return
Long-term debt		$	40	million				7.0	%
Preferred stock			20	million				9.0
Common stock			60	million				12.0

	Source of Funds Components for WACC Calculation Long-term debt % Preferred stock % Common stock % %

Answer 1