Weighetd average cost of capital (WACC)
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What is the WACC for a corporation that faced a 45% tax rate? It is solely financed by stock. They have 100 shares of preferred stock that pay a dividend of $150 that has a rate of return of 12%. They have 100,000 shares of common stock that sell for $12. The expected return of the S&P 500 is 11% and 4% for T-bills. The corporation's beta is 1.7.
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Solution Summary
Calculates WACC (weighted average cost of capital) for a corporation that is solely financed by stock.
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