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    Weighted Average Cost of Capital

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    I need help with this assignment I am really lost.

    With the following data, calculate the individual cost for each security and the overall WACC.

    Percent of capital structure:

    Debt 35%
    Preferred stock 10%
    Common equity 55%

    Additional Information

    Bond coupon rate 11%
    Bond Yield to maturity 9%
    Dividend, expected common $2.50
    Dividend, preferred $7.00
    Price, common $45
    Price preferred $100
    Flotation costs, preferred $5.00
    Growth rate 8%
    Corporate tax rate 35%

    Please use the WACC formula to calculate weighted Average Cost of Capital Calculation, show me step by step so I can understand.

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    Solution Preview

    With the following data, calculate the individual cost for each security and the overall WACC.

    Percent of capital structure:

    Debt 35%
    Preferred stock 10%
    Common equity 55%

    Additional Information

    Bond coupon rate 11%
    Bond Yield to maturity 9%
    Dividend, expected common $2.50
    Dividend, preferred $7.00
    Price, common $45
    Price preferred $100
    Flotation costs, preferred $5.00
    Growth rate 8%
    Corporate tax rate 35%

    Weighted Average Cost of Capital Calculation
    WACC = [D x r debt x (1-Tc)]+[p x r preferred]+[e x r equity]
    ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate WACC for the company.

    $2.19

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