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    Weighted Average Cost of Capital (WACC) : key information

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    A firm has determined its cost of each source of capital and optional capital structure which is composed of the following sources and target market value propositions:

    Sources of Capital Target Market After-tax cost

    Long-term debt 40% 6%
    Preferred Stock 10 11
    Common stock equity 50 15

    The weighted average cost of capital is:

    A. 15%

    B. 10.7%

    C. 11%

    D. 6%

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    Solution Summary

    Response helps in calculating weighted average cost of capital