# Target Capital Structure (WACC)

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 ad1c9bdddfhttps://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