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Weighted average cost of capital

Problem 12:
Given the following data:
Percent of capital structure:
Debt 40%
Preferred stock 10
Common equity 50
Additional information:
Bond coupon rate 12%
Bond yield to maturity 13%
Dividend, expected common $4.00
Dividend, preferred $12.00
Price, common $60.00
Price, preferred $78.00
Flotation cost, preferred $7.50
Growth rate 21%
Corporate tax rate 30%
Calculate the individual capital costs for each security and the weighted average cost of capital.

Solution Preview

Problem 12:
Given the following data:
Percent of capital structure:
Debt 40%
Preferred stock 10
Common equity 50
Additional information:
Bond coupon rate 12%
Bond yield to maturity 13%
Dividend, expected common $4.00
Dividend, preferred $12.00
Price, common $60.00
Price, preferred $78.00
Flotation cost, preferred $7.50
Growth rate 21%
Corporate tax rate 30%
Calculate the individual capital costs for each security and ...

Solution Summary

This solution is comprised of a detailed explanation to calculate the weighted average cost of capital.

$2.19