# Computing the Weighted Average Cost of Capital

A) Suppose a company has bonds of $600,000, preferred stock of $100,000 and common stock of $300,000. The after tax cost of tax is 6%, preferred stock is 8%, and common stock is 12%. What is the WACC?

B) Suppose a company has bonds of $600,000, preferred stock of $100,000 and common stock of $300,000. The before tax cost of tax is 8%, preferred stock is 8%, and common stock is 12%. The tax rate is 35% What is the WACC?

C) Which company has the preferable WACC? Why?

do the calculation in excel sheet with explanation please

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#### Solution Preview

The company's WACC=[Cost of debt*(1-tax rate)*(Value of Debt/Total Capital)]+[Cost of ...

#### Solution Summary

This solution computes the weighted-average cost of capital for a firm with bonds, preferred stock, and common stock. The solution is on an Excel spreadsheet.