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    Target Capital Structure (WACC)

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    Suppose Bianca's target capital structure is as follows:

    Wd=0.40 Wps=0.10 Wce=0.50;

    Its before-tax cost of debt is 8.0%, cost of equity is 12.0%, cost of preferred stock is 8.4%, and the marginal tax rate is 40%. Calculate Bianca's Weighted Average Cost of Capital (WACC).

    Please show your work so I can understand how to do this going forward. Thank you.

    © BrainMass Inc. brainmass.com October 10, 2019, 7:29 am ad1c9bdddf
    https://brainmass.com/business/weighted-average-cost-of-capital/target-capital-structure-wacc-583768

    Solution Preview

    The WACC function is:
    WACC = Wd * Rd (1-t) + Wce * Rce + Wps * Rps

    According to ...

    Solution Summary

    This solution computes the weighted average cost of capital (WACC) based on the initial costs of capital.

    $2.19