- Weighted Average Cost of Capital (WACC)
Calculating the WACC for Melancholy Business Solution
Melancholy Business Solution's capital structure is as follows:
Preferred stock 15
Common equity 50
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 Melancholy Business Solution's weighted average cost of capital.
The solution explains the calculation of weighted average cost of capital (WACC) with debt and common equity as capital components