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    After-tax Cost of Funds and Cost of Capital

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    Calculate the after-tax cost of funds and the weighted average cost of capital (WACC) for the following:

    Common stock Debt (annual coupon)

    last dividend 3.85 coupon rate 9%
    market value $45 maturity 20
    growth rate $5% market value $1100.00
    flotation costs 3% flotation costs 3%
    weight 50% tax rate 36%

    preferred stock face value $1000.00

    last dividend 1.50 weight 40%
    market value 13.00
    flotation costs 3%
    weight 10%

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    Solution Summary

    The solution explains how to calculate the component cost of capital and the WACC.