Question

You were hired as a consultant to Kangaroo Corporation, whose target capital structure

is 30% debt, 5% preferred, and 65% common equity. The before-tax cost of debt is
9.55%, the yield on preferred is 8.75%, and the cost of retained earnings is 14.00%.
The tax rate is 35%.

1. What is the company's WACC?

Answer 1

Answer: 11.4%

Step-by-step explanation:

The weighted average cost of capital (WACC) is used by companies to calculate their cost of capitsk. It should be noted that a weight is assigned to every category of capital that's utilized.

Sources of capital, such as bonds, common and preferred stock, etc are included when the WACC is being calculated.

The WACC for the company is 11.4%. Check the attachment for more details.