Martin Corporation has the following equity structure: $\begin{array}{cccc}
&\text { Market Value } & \text { Pretax Cost } & \text {After-Tax Cost }\
\text { Long-term debt } & \$ 300,000 & 10 \% & 6 \% \
\text { Preferred stock } & 500,000 & 10 & 10 \
\text { Common stock } & 200,000 & 15 & 15
\end{array}$
Martin's weighted average cost of capital is:
A) 9.8%
B) 10.3%
C) 11.0%
D) 12.5%

Question

Martin Corporation has the following equity structure: $\begin{array}{cccc}
&\text { Market Value } & \text { Pretax Cost  } & \text {After-Tax Cost }\
\text { Long-term debt } & \$ 300,000 & 10 \% & 6 \% \
\text { Preferred stock } & 500,000 & 10 & 10 \
\text { Common stock } & 200,000 & 15 & 15
\end{array}$
 Martin's weighted average cost of capital is:
A) 9.8%
B) 10.3%
C) 11.0%
D) 12.5%

Quizplus · Accepted Answer

The WACC is calculated as: $(300,000/1,000,000) \times 6\% + (500,000/1,000,000) \times 10\% + (200,000/1,000,000) \times 15\% = 9.8\%$.

Martin Corporation Has the Following Equity Structure Martin's Weighted Average Cost of Capital Is: A) 9

Martin Corporation Has the Following Equity Structure Martin's Weighted Average Cost of Capital Is:
A) 9