Weighted Average Cost of Capital Brown\'s financing structure is as follows: Cos

Question

Weighted Average Cost of Capital Brown's financing structure is as follows: Cost of Source of Capital Capital Amount 6% Debt financing $ 100,000 8% Preferred Stock 80,000 10% Common Stock 160,000 12% Retained Earnings 200,000 $ 540,000 Compute the overall weighted average cost of capital. Weighted Average Cost of Capital Brown's financing structure is as follows: Cost of Source of Capital Capital Amount 6% Debt financing $ 100,000 8% Preferred Stock 80,000 10% Common Stock 160,000 12% Retained Earnings 200,000 $ 540,000 Compute the overall weighted average cost of capital.

Explanation / Answer

WACC = 6% * (100/540) + 8% * (80/540) + 10% * (160/540) + 12% * (200/540)

=9.70 %

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