# Calculating firm's weighted average cost of capital

A firm plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt 10%, preferred stock 11%, and common stock 18%. Assuming a 40% marginal tax rate, what is the firm's weighted average cost of capital? a) 10% b) 12% c) 13% d) 14.2%.

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A firm plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt 10%, preferred stock 11%, and common stock 18%. Assuming a 40% marginal tax rate, what is the firm's ...

#### Solution Summary

The solution calculates a firm's weighted average cost of capital.

$2.19