The pre-tax cost of debt is 11%,preferred stock costs 14%,and equity costs 15%.What is the weighted average cost of capital assuming a tax rate of 40% and a target capital structure of 40% debt,20% preferred stock,and 40% equity?

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Quizplus · Accepted Answer

WACC = W_dK_d 11ea7fdb_fc74_f4c5_a768_1ff2f6ad1dd8_TB2902_11 + W_pK_p + W_eK_e WACC = (0.40 × 0.11)(1 - 0.40) + (0.20 × 0.14) + (0.40 × 0.15) = 11.4%

The Pre-Tax Cost of Debt Is 11%,preferred Stock Costs 14%,and