A firm is financed 55% by common stock,10% by preferred stock and 35% by debt.The required return is 15% on the common,10% on the preferred,and 8% on the debt.If the tax rate is 35% what is the WACC?

Name: A firm is financed 55% by common stock,10% by preferred stock and 35% by debt.The required return is 15% on the common,10% on the preferred,and 8% on the debt.If the tax rate is 35% what is the WACC?
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Question

Quizplus · Accepted Answer

WACC = (0.55 × 0.15) + (0.1 × 0.1) + [0.35 × 0.08 × (1 − 0.35)] = 0.1107, or 11.07%

A Firm Is Financed 55% by Common Stock,10% by Preferred