Jones Enterprises has the following capital structure: Long-term Debt $100,000 P

Question

Jones Enterprises has the following capital structure:

                                                Long-term Debt          $100,000

                                                Preferred Stock           $400,000

                                                Common Equity          $500,000

            Debt has an after tax cost of 5.6%, Preferred Stock 7.5 %, and Common Equity 9.2%. Calculate the weighted average cost of capital for Jones Enterprises (in terms of % to one decimal point).

Explanation / Answer

weighted average cost of capital for Jones Enterprises = (100,000*5.6% + 400,000*7.5% + 500,000*9.2%)/(100,000 + 400,000 + 500,000) =8.2%

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