You are a consultant to Pillbriar Company. Pillbriar's target capital structure is 36% debt, 14% preferred, and 50% common equity. The interest rate on new debt is 7.8%, the yield on the preferred is 7.00%, the cost of retained earnings is 11.75%, and the tax rate is 38%. The firm will not be issuing any new stock. What is Pillbriar's WACC?© BrainMass Inc. brainmass.com October 10, 2019, 6:25 am ad1c9bdddf
Weight of debt=wd=0.36
Interest rate on debt=rd=7.8%
Solution describes the steps to estimate the WACC in the given case.