Wayco Industrial Supply has a pre-tax cost of debt of 7.6 percent,a cost of equity of 14.3 percent,and a cost of preferred stock of 8.5 percent.The firm has 220,000 shares of common stock outstanding at a market price of $27 a share.There are 25,000 shares of preferred stock outstanding at a market price of $41 a share.The bond issue has a face value of $550,000 and a market quote of 101.2.The company's tax rate is 37 percent.What is the firm's weighted average cost of capital?

Question

Quizplus · Accepted Answer

WACC = ($5,940,000/$7,521,600) (0.143) + ($1,025,000/$7,521,600) (0.085) + ($556,600/$7,521,600) (0.076) (1 - 0.37) = 12.81 percent

Wayco Industrial Supply Has a Pre-Tax Cost of Debt of 7.6