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    Cost stucture: WACC

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    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?

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    Solution Preview

    Weight of debt=wd=0.36
    Interest rate on debt=rd=7.8%
    Tax ...

    Solution Summary

    Solution describes the steps to estimate the WACC in the given case.

    $2.19