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.
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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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