What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective costs for these components are 9.23% before tax, 12% after tax, and 18% before tax? The firm's tax rate is 35%.

Name: What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective costs for these components are 9.23% before tax, 12% after tax, and 18% before tax? The firm's tax rate is 35%.
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Question

Quizplus · Accepted Answer

WACC = [0.4 × (1 - 0.35 × 9.23%)] + (0.2 × 12%) + (0.4 × 18%) = 12.0%

What Is the WACC for a Firm with 40% Debt