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WACC STEP BY STEP SOLUTION

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Clearly chip has the capital structure given here. If Clearly Chip tax rate is 30%, what is its WACC?

BOOK VALUE MARKET VALUE BEFORE TAX COST
Bond $ 1,000 $ 1,000 8%
Preferred stock 400 300 9%
Common stock 600 1.700 14%

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Solution Summary

This solution helps with a problem involving stocks and weighted average cost of capital.

Solution Preview

We are using Market value and NOT the Book Value.

Total Market Value = 1000 + 300 + 1700 = 3000
Debt =1000/3000= 33.33% or ...

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