Is the symbol that represents the cost of preferred stock in the weighted average cost of capital (wacc) equation?

1 answer:

wel2 years ago

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Yakov Co. has $2.3 million of debt, $3.04 million of preferred stock, and $1.34 million of common equity is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation.

The math is easy. Divide the present value of each stock position by the total value of the portfolio and multiply by 100 to convert it to a percentage. These weights indicate how dependent the portfolio's performance is on individual stocks.

The cost of preferred stock represents the rate of return required by preferred shareholders and is calculated by dividing the annual preferred dividend (DPS) paid by the current market price.

WACC equation Part 2 – Borrowing Costs and Preferred Stock

Borrowing cost is the rate of return to maturity on a company's debt; similarly, the cost of preferred stock is the rate of return on a company's preferred stock.

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