Shi Importers' WACC
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Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi faces a 40% tax rate and the following data:
rd=6%
rps=5.8%
rs=12%
If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is Shi's WACC?
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Solution Summary
The solution explains how to determine the company's WACC with calculations, formula and answer.
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WACC = Proportion of debt X after tax cost of debt + proportion of preferred stock X cost of preferred stock + proportion of common stock X cost of common stock
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