Weighted Average Cost of Capital Austin, Inc. plans to finance its expansion by

Question

Weighted Average Cost of Capital Austin, Inc. plans to finance its expansion by raising the needed investment capital from the following sources in the indicated proportions and respective capital cost rates apital Cost Source Bonds Preferred stock Common stock Retained earnings Proportion Rate 45% 10% 10% 8% 25% 14% 20% 12% 100% Calculate the weighted average cost of capital Round answers to one decimal place. For example, 0.4567-45.7%. Weighted Average Cost of Capital Bonds Preferred stock Common stock Retained earnings Check

Explanation / Answer

WACC :

Cost of capital Bonds (45%*10%) 4.5% Preferred stock (10%*8%) 0.8% Common Stock (25%*14%) 3.5% Retained earnings (20%*12%) 2.4% 11.2%

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