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    XYZ's weighted average cost of capital

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    The XYZ corporation has $100 million of long term debt paying ten percent interest and is in the 40 percent tax bracket. The firm also has $50 million of preferred stock paying a 12 percent dividend and $100 million of common growing at a constant rate of 15 percent per year. If the expected dividend is $2.00 and the stock is selling for $40.00, what is XYZ's weighted average cost of capital? (SHOW YOUR WORK).

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    Solution Preview

    Wd= Weight of debt Kd= Cost of Debt
    We= Weight of equity Ke= Cost of Equity
    Wp= Weight of preferred Kp= Cost of ...

    Solution Summary

    XYZ's weighted average cost of capital is depicted.