Mirion Tech, Inc., has r_E of 12 percent, an r_D of 6 percent, at a debt-equity ratio of 0.50.Mirion plans to raise enough preferred stock to retire half of their outstanding common stock, which currently has a market value of $7 million.If the preferred stock has an expected rate of return of 10 percent, what is the new WACC? (Assume a 35 percent marginal corporate tax rate and that r_D remains at 6 percent.)

Question

Quizplus · Accepted Answer

The new WACC is calculated by considering the weights and costs of debt, equity, and preferred stock, adjusted for taxes. The formula is: WACC = (E/V) * rE + (P/V) * rP + (D/V) * rD * (1-Tc). With the given values and adjustments for the new capital structure, the WACC is approximately 9.30 percent.