WACC for Kepler Inc
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Kepler, Inc. has determined that its target capital structure will be 30% debt, 15% preferred stock, and 55% common stock. Also, the company's provides the following information:
Bond coupon rate 13% Bond yield to maturity 11%
Dividend, expected common $3.00 Dividend, preferred $10.00
Price, common $50.00 Price, preferred $98.00
Growth rate 8%
Corporate tax rate 30%
Based on the information provided, calculate the firm's weighted average cost of capital (WACC).
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Solution Summary
The solution explains how to calculate the WACC using the example of Kepler Inc
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We need to find the cost of debt, preferred stock and common and use the capital structure proportions to get the WACC. The cost of debt is the after tax YTM. We ...
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