I'm confused on this problem. I know you are supposed to get the cost(aftertax), multiply by the weight to get the weighted cost. Then add the weighted costs to arrive at the weighted average cost of capital.
Smith and Jones Widget Company has total capital, consisting of long-term debt and common equity of $80 million. Thirty-two million of total capital is in the form of long-term debt, which carries a cost of 12 percent. The company's equity carries a cost of 19.50 percent. If the company's tax rate is 38 percent, what is the company's WACC?
Common stock cost= ?
Debt cost= 12%
Preferred stock cost= 19.50%
Don't you need the weights to do the calculations?
Computations shown with formula