Computing WACC for Smith Company
You work for Smith Company as a consultant. Kroncke target capital structure is 30% debt, 20% preferred, and 50% common equity. The after-tax cost of debt is 8%, the cost of preferred is 6.5%, and the cost of retained earnings is 13.25%. the firm will not be issuing any new stock. What is its WACC? a. 10.07% b. 10.