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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:

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.

$2.19