Purchase Solution

Weighted Average Cost of Capital (WACC)

Not what you're looking for?

Ask Custom Question

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%.

Purchase this Solution
Solution Summary

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

Solution Preview

Please find my response below.

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 earnings of $230 million. The expected rate of ...

Purchase this Solution
Free BrainMass Quizzes
SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • WACC

    133650 WACC: Weighted Average Cost of Capital Determine the weighted average cost of capital (WACC) for the XYZ Company that will finance its optimal capital budget with $120 million of long-term debt (kd = 12.5%) and 180 million in retained earnings

  • Calculate the Weighted-Average Cost of Capital (WACC)

    Calculate GII weighted average cost of capital (WACC). GII's weighted-average cost of capital will be computed as follows: 1.

  • Weighted Average Cost of Capital: Capital Investment Program

    320144 Weighted Average Cost of Capital: Capital Investment Program What is the Weighted Average Cost of Capital? How it is used in a capital investment program to select investments? What is the Weighted Average Cost of Capital?

  • Divisional Cost of Capital Approach vs Weighted Average Cost of Capital

    268840 Divisional Cost of Capital Approach vs Weighted Average Cost of Capital Please explain how to calculate the weighted average cost of capital and how it compares to divisional cost of capital approach. Thank you. Currently, Red Sun, Inc.'

  • Weighted Average Cost of Capital.

    To determine cost of capital, an important concept is weighted average cost of capital. Define Weighted Average Cost of Capital (WACC). How WACC is calculated ? Take an example of a large and popular public company and calculate its WACC.

  • What's the weighted average cost of capital (WACC) for the c

    357684 What's the weighted average cost of capital (WACC) The all equity cost of capital for a company is 15%, and the company has set a target debt to value ratio of 50%.

  • Weighted Average Cost of Capital

    182249 Weighted Average of Cost of Capital Is it important to know your company's WACC? Why or why not? How might management decisions impact the WACC? To what extent is your company's WACC uncontrollable?

  • Capital Structure in a Perfect Market

    Suppose Rumolt's equity cost of capital is 10%, and its debt cost of capital is 5%. a. What is Mike's pretax weighted average cost of capital? Pretax weighted average cost of capital = b.

  • Weighted Average Cost of Capital

    164445 A Company's Weighted Average Cost of Capital In a company with the following known information what is the Weighted Average Calculation of Capital (WACC): After tax cost of debt 6%, cost of preferred stock including flotation cost is 10%, cost

  • WACC

    200259 WACC What is meant by Weighted Average Cost of Capital (WACC)? What is the impact on WACC when an organization needs to raise long term capital? What is meant by Weighted Average Cost of Capital (WACC)?

View More Related Solutions