# Calculate WACC for Boonville and Western Transportation Co.

The Boonville and Western Transportation Co. has the following capital structure.

 Stock $50 mil with a P/E of 8

 Bonds $20 million at 8 %

The company has a tax rate of 35%

What is the weighted average cost of Capital (WACC)

If the Boonville and Western Transportation Co had Bonds of $50 million and Stock of $20 million what would the (WACC) be?

Is this an overstatement?

https://brainmass.com/business/weighted-average-cost-of-capital/calculate-wacc-boonville-western-transportation-182588

#### Solution Preview

- What is the weighted average cost of Capital (WACC)?

We need to know the stock's growth rate g and its dividend payout ratio d.

The dividend paid is then the product of earnings and dividend payot ratio, i.e., D= E*d

By Dividend Discounted Model, the stock's cost ...

#### Solution Summary

The solution presents all the calculations for the weighted average cost of capital (WACC) plus a response to the question about an overstatement.