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Weighted Average Cost of Capital (WACC)

A corporation wants to calculate its weighted average cost of capital. It has $500 million B-rated bonds at an average rate of 5.43%, 374 million shares of common stock outstanding @ $1 par, and retained earnings of $230 million. The expected rate of return in the stock market for equities of similar risk and characteristics is 10%. What is the corporation's WACC?

a. 5.43%
b. 7.93%
c. 10%
d. 15.43%

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Kao-wen Peng

Weighted Average Cost of Capital (WACC)
A corporation wants to calculate its weighted average cost of capital. It has $500 million B-rated bonds at an average rate of 5.43%, 374 million shares of common stock outstanding @ $1 par, and retained ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to find the WACC for the firm.

$2.19