What is the WACC for a firm using 55% equity with a required return of 35%

What is the WACC for a firm using 55% equity with a required return of 35%, 15% debt with a required return of 8%, 10% preferred stock with a required return of 10%, and a tax rate of 35%?

		11.07%
		15.72%
		21.03%
		10.72%

Solutions

Expert Solution

WACC = Weights * costs

WACC = 0.55*0.35 + 0.15*0.08*(1 - 0.35) + 0.1*0.1

WACC = 0.1925 + 0.0078 + 0.01

WACC = 0.2103 or 21.03%

jeff jeffy answered 2 years ago

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