What is the weighted average cost of capital for a firm in the 35% corporate tax bracket, with the following:
Financing Amount Rate of Interest for each.
Equity $ 1,150,000 11.57%
Debt $ 780,000 6.40%
Preferred $ 325,000 9.35%
Please show all work.
The weighted average cost of capital is given as
proportion of debt X cost of debt + proportion of preferred stock X cost of preferred stock + proportion of equity X cost of ...
The solution explains how to calculate the weighted average cost of capital.