Question

What is the WACC for a firm using 55% equity with a required return of 15%, 35% debt with a required return of 8%, 10% preferred stock with a required return of 10%, and a tax rate of 35%

Answer 1

11.07%

Step-by-step explanation:

WACC = (weight of equity x cost of equity) + (weight of debt x cost of debt x (1 - tax rate) + (weight of preferred equity x cost of debt)

(0.55 x 15%) + (0.35 x 8% x 0.65) + (0.10 x 10%) = 11.07%