were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity.The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from retained earnings is 11.25%, and the tax rate is 40%.The firm will not be issuing any new common stock.What is Quigley's WACC?

Question

Quizplus · Accepted Answer

The WACC is calculated as follows: WACC = (E/V * Re) + (D/V * Rd * (1-Tc)) + (P/V * Rp), where E, D, and P are the market values of equity, debt, and preferred stock, respectively, and V = E + D + P. Re, Rd, and Rp are the costs of equity, debt, and preferred stock, and Tc is the tax rate. Substituting the given values: WACC = (0.55 * 11.25%) + (0.35 * 6.50% * (1-0.40)) + (0.10 * 6.00%) = 8.15%.

Were Hired as a Consultant to Quigley Company, Whose Target