Weighted Average Cost of Capital
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With the following data, calculate the individual cost for each security and the overall WACC.
Percent of capital structure:
Debt 35%
Preferred stock 10%
Common equity 55%
Additional Information
Bond coupon rate 11%
Bond Yield to maturity 9%
Dividend, expected common $2.50
Dividend, preferred $7.00
Price, common $45
Price preferred $100
Flotation costs, preferred $5.00
Growth rate 8%
Corporate tax rate 35%
Please use the WACC formula to calculate weighted Average Cost of Capital Calculation, show me step by step so I can understand.
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With the following data, calculate the individual cost for each security and the overall WACC.
Percent of capital structure:
Debt 35%
Preferred stock 10%
Common equity 55%
Additional Information
Bond coupon rate 11%
Bond Yield to maturity 9%
Dividend, expected common $2.50
Dividend, preferred $7.00
Price, common $45
Price preferred $100
Flotation costs, preferred $5.00
Growth rate 8%
Corporate tax rate 35%
Weighted Average Cost of Capital Calculation
WACC = [D x r debt x (1-Tc)]+[p x r preferred]+[e x r equity]
...
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