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WACC

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Copernicus Inc. has determined that its target capital structure will be 60% debt, 10% preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the company's before tax cost of debt is 10%, preferred stock is 14%, and common stock is 16%. In addition, the company's marginal tax rate is 40%. Based on the information provided, calculate the weighted average cost of capital (WACC).

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The solution explains the calculation of WACC

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The WACC is calculated as
WACC=Proportion of debt X cost of debt + proportion of preferred stock X cost of preferred ...

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