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Finance: Compute WACC for Smith Company

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You work for Smith Company as a consultant. Kroncke target capital structure is 30% debt, 20% preferred, and 50% common equity. The after-tax cost of debt is 8%, the cost of preferred is 6.5%, and the cost of retained earnings is 13.25%. the firm will not be issuing any new stock. What is its WACC?

a. 10.07%
b. 10.37%
c. 9.48%
d. 10.68%
e. 10.325%

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Solution Summary

This solution demonstrates using simple calculation and formula how to calculate the weighted average cost of capital.

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