Weighted average cost of capital if retained earnings
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Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common equity. The company's after tax cost of debt is 8%, its cost of preferred debt is 10%, its cost of retained earnings is 14%, and its cost of new common stock is 16%. The company stock has a beta of 1.2 and the company's marginal tax rate is 35%.
What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?
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Response discusses weighted average cost of capital if retained earnings are used
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Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common equity. The companyâ??s after tax cost of debt is 8%, its cost of preferred ...
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