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 Summary
Solution describes the steps for calculating WACC of a company whose capital consists of preferred stock, common stock and debt.
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Solution:
First let us find cost of common stock:
Cost of common stock = risk free rate +Beta*(market risk ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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