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Alika [10]
3 years ago
9

A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sourc

es and target market value proportions:
Source of capital / Taget Market Proportions / After-Tax Cost
Long-term Debt/ 40% / 6%
Preferred Stock / 10% / 11
Common Stock Equity / 50 / 15
The weighted average cost of capital is__________.
Business
1 answer:
Morgarella [4.7K]3 years ago
6 0

Answer:

11%

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt ×  after cost of debt + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of  common stock) × (cost of common stock)

= (0.40 × 6%)  +  (0.10 × 11%) +  (0.50 × 15%)

= 2.4% + 1.1% + 7.5%

= 11%

Simply we multiply the weightage with its cost so that the correct cost of capital can come based on weighted average

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Marigold Corporation's December 31, 2020 balance sheet showed the following: 6% preferred stock, $20 par value, cumulative, 4000
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3 years ago
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Kari is a limited partner in Lizard Partnership. This year, Kari's share of partnership ordinary income is $20,000, and she rece
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b. $26480

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