A firm has a capital structure that uses 45 percent equity,20 percent preferred shares,and 35 percent debt.The preferred shares have a current yield of 5.5 percent.The debt has a coupon rate of 10 percent and a current yield to maturity of 6.5 percent.The common shares have a yield of 8 percent.The tax rate is 25 percent.What is the firm's WACC?
A) 5.231%
B) 6.700%
C) 6.406%
D) 6.975%

Question

Quizplus · Accepted Answer

0.45*8% + .20*5.5% + .35*6.5%*(1-.25)= 6.406%

A Firm Has a Capital Structure That Uses 45 Percent