Weighted Average Cost of Capital
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1. Wilson & Associates capital structure is as follows:
The after-tax cost of debt is 6.5%; the cost of preferred stock is 10%; and the cost of common equity (in the form of retained earnings) is 13.5%.
Calculate the weighted average cost of capital in a manner similar to Table 11-1 below.
Table 11-1: Cost of Capital
2. Assume that Rf = 5% and Km = 10.5%. Using the following formula:
Compute Kj for the following betas:
a. 0.6
b. 1.3
c. 1.9
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