weighted average cost of capital
Not what you're looking for?
I'm confused on this problem. I know you are supposed to get the cost(aftertax), multiply by the weight to get the weighted cost. Then add the weighted costs to arrive at the weighted average cost of capital.
Smith and Jones Widget Company has total capital, consisting of long-term debt and common equity of $80 million. Thirty-two million of total capital is in the form of long-term debt, which carries a cost of 12 percent. The company's equity carries a cost of 19.50 percent. If the company's tax rate is 38 percent, what is the company's WACC?
Common stock cost= ?
Debt cost= 12%
Preferred stock cost= 19.50%
Don't you need the weights to do the calculations?
Purchase this Solution
Solution Summary
Computations shown with formula for the weighted average cost of capitals.
Solution Preview
Please see the attached file.
Smith and Jones Widget Company has total capital, consisting of long-term debt and common equity of $80 million. Thirty-two million of total capital is in the form of long-term debt, which carries a cost ...
Purchase this Solution
Free BrainMass Quizzes
Introduction to Finance
This quiz test introductory finance topics.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Motivation
This tests some key elements of major motivation theories.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking