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FIN - Weighted Average Cost of Capital (WACC) Problems

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Question;I. First, here is a good example of a WACC calculation.Debt Market Value = $100 millionPreferred stock Market Value = $50 millionCommon stock Market Value = $350 millionThen the total capital base = $500 million.Rd = 6% (assume after tax)Rp = 8%Re = 11%Find the weighted average cost of capital (WACC).II. **SECOND SAMPLE PROBLEM!**The weight of debt = 30%.The weight of Preferred stock = 15%The weight of Common stock = 55%You are also given the following information:The market yield to maturity is 11%The corporate tax rate is 34%The expected common dividend is $3.00 per shareThe price of common stock is $50 per shareThe expected growth rate of common stock is 8%The preferred dividend is $10.00 per shareThe price of preferred stock is $98.00 per shareWhat is the weighted average cost of capital (WACC)?

 

Paper#48605 | Written in 18-Jul-2015

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