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Weighted Average Cost of Capital

OUR Corp. has a current capital structure of $18 million in secured bonds paying 6.5% annual interest, and common stock with a market value of $42 million. Its marginal tax rate is 40% and its cost of common equity capital is 13%.

a. What are the capital structure weights?

b. Calculate the company's Weighted Average Cost of Capital.

Solution Preview

The answers are in the attached file:
OUR Corp. has a current capital structure of $18 million in secured bonds paying 6.5% annual interest, and common stock with a market value of $42 million.  Its marginal tax rate is 40% and its cost of common equity capital is 13%.

a. What are the capital structure ...

Solution Summary

Capital structure weights and Weighted Average Cost of Capital have been calculated.

$2.19