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    Calculating WACC of Global Technology

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    Global Technology's capital structure is as follows:
    Debt 35%
    Preferred Stock 15%
    Common Stock 50%

    The cost of debt is 8 percent. The tax rate is 34 percent. The cost of preferred stock is 10 percent. The beta for the common stock is 1.4. The risk free rate is 4 percent and the risk premium is 7.5 percent.

    What is the WACC calculation?

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    Solution Preview


    First let us find cost of common stock:

    Cost of common stock = risk free rate +Beta*(market risk ...

    Solution Summary

    Solution describes the steps for calculating WACC of a company whose capital consists of preferred stock, common stock and debt.