The after tax cost of debt is 6.5 percent; the cost of preferred stock is 10 percent; and the cost of common equity (in the form of retained earnings) is 13.5 percent. Calculate Global Technology's weighted average cost of capital in a manner similar to Table 11-1 on page 313.

From page 313
Table 11-1
Cost of capital?Baker
Corporation
(1)
Cost (aftertax) (2)

Weights (3)
Weighted
Cost
Debt Kd 7.05% 30% 2.12%
Preferred stock Kp 10.94 10 1.09
Common equity (retained earnings) Ke 12.00 60 7.20
Weighted average cost of capital Ka 10.41%

Problem 2
Assume that Rf = 5 percent and Km = 10.5 percent. Compute Kj for the following betas, using Formula 11A-2.

a. 0.6

b. 1.3

c. 1.9

Formula 11A-2 Kj = Rf + β(Km - Rf)

Where
Rf= Risk-free rate of return
β = Beta coefficient from Formula 11A-1
(Kj = α + βKm + e)
Km= Return on the market index
Km - Rf = Premium or excess return of the market versus the risk-free rate (since the market is riskier than Rf, the assumption is that the expected Km will be greater than Rf)
β(Km -Rf)= Expected return above the risk-free rate for the stock of Company j, given the level of risk

This solution shows step-by-step calculations to determine the Weighted Average Cost of Capital and the expected return above the risk-free rate. All formulas are workings are shown in a clear manner with brief explanations.

Copernicus Inc. has determined that its target capitalstructure 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 4

A firm has determined its cost of each source of capital and optimal capitalstructure, which is composed of the following sources and target market value proportions:
Source of Capital Target Market Proportions After-Tax Cost
Long-term debt 45% 5%
Preferred

Cookie Dough Manufacturing has a target debt−equity ratio of 0.63. Its cost of equity is 19 percent, and its cost of debt is 8 percent. If the tax rate is 33 percent, the company's WACC is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places, e.g. 32.16.)
HERE ARE SOME HINTS

Mullineaux Corporation has a target capitalstructure of 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 15 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent.
a. What is Mullineaux's WACC?
b. The company

You were hired as a consultant to Kroncke Company, whose target capitalstructure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 13.25%. The firm will not be issuing any new stock. What is its WACC?
a. 9.4

Global Technology's capitalstructure 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

These 2 questions need the attached Table 11-1.
Global Technology's capitalstructure is as follows :
_______________________
Debt------------------------35%
Preffered stock------------15
Common Equity-----------50
_______________________
The aftertax cost of debt is 6.5%; the cost of preferred stock is 10%; and the c

Jingle Bell is 60% debt-financed and the expected return on its debt is 6%. Its equity
beta is 2. Risk-free rate of return is 4% and market risk premium is 4%. Assume Jingle Bell operates in a MM world with no taxes.
a) What is Jingle Bell's WACC?
b) An investor has invested all her savings (â?¬10,000) in bell product

Which is not required information when calculating the weighted average cost of capital for a company with debt?
1-its capitalstructure ratios
2-its cost of debt
3-its current ratio
4-its tax rate