# Computing The Weighted Average Cost of Capital

The following is on a balance sheet

Current Asset: $3,600

Fixed Asset: $6,400

Total Assets: $10,000

Debt: $5200

Preferred Stock: $600

Common equity $4200

Total liabilities and equity: $10,000

The market value of debt, preferred stock, and common equity equals its book value. Cost of debt is 8.0%, it cost of preferred stock is 7.7% and its cost of common equity is 16.3% . Tax rate is 40% what is the WACC?

Options (choose one)

A. 9.80

B. 10.43

C. 9.65

D 10.95

E 10.23

If possible please provide spread sheet

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#### Solution Preview

The after-tax cost of debt=cost of debt*(1-tax rate). In this case, the cost of debt is .08*(1-.40), or 4.80 percent.

Type Cost Market Value Percentage ...

#### Solution Summary

Using an Excel 97-2003 file, given a company's balance sheet, tax rate and costs of equity and debt, it demonstrates how to compute the weighted-average cost of capital.