What is the WACC for a firm with 40% debt, 20% preferred stock and 40% equity if

Question

What is the WACC for a firm with 40% debt, 20% preferred stock and 40% equity if the respective costs for these components are 8% after-tax, 13% after-tax, and 17% before-tax? The firm's tax rate is 35%. (Answer is 12.6%)

What is the WACC for a firm with equal amounts of debt and equity financing, a 15% before-tax company cost of capital, a 35% tax rate, and a 12% coupon rate on its debt that is selling at par value? (Answer is 12.9%)

I included the answers to the questions, I just need the equations and steps to get to the answers.

Explanation / Answer

Cost Weight Debt 8% 40% Preferred 13% 20% Equity 17% 40% 12.60% Kd*Wd + Kp*Wp + Ke*We

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.