The capital structure for the CR Corporation includes: bonds $5,500 and common stock $11,000.If CR has an after-tax cost of debt of 6%,and a 16% cost of common stock,what is its WACC?

Question

Quizplus · Accepted Answer

The WACC is calculated by weighting the cost of each component by its proportion in the total capital. The formula is: WACC = (E/V * Re) + (D/V * Rd * (1-T)). Here, E = $11,000, D = $5,500, V = $16,500. Re = 16%, Rd = 6%. WACC = (11,000/16,500 * 16%) + (5,500/16,500 * 6%) = 12.67%.

The Capital Structure for the CR Corporation Includes: Bonds $5,500