What is the WACC for a firm using 55% equity with a required return of 15%, 35% debt with a required return of 8%, 10% preferred stock with a required return of 10%, and a tax rate of 35%?

Question

Quizplus · Accepted Answer

Using the given values, we can calculate the WACC as follows:

WACC = (.35 x (1 - .35).08) + (.1 x .1) + (.55 x .15)
     = 0.0552 + 0.01 + 0.0825
     = 0.1477 
     = 14.77%

Therefore, the best choice is B, which is closest to this value.

What Is the WACC for a Firm Using 55% Equity