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%, and 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 the calculation of WACC
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WACC = Proportion of debt X after tax cost of debt + Proportion of preferred stock X cost of preferred stock + ...
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