Baskin Robbin Corporation's capital structure is 30% debt, 10% preferred, and 60% common equity. The company’s...

Baskin Robbin Corporation's capital structure is 30% debt, 10% preferred, and 60% common equity. The company’s cost of debt is 7%, cost of preferred is 8%, and cost of equity is 11%. The firm's marginal tax rate is 40 percent. What is the weighted average cost of capital for Baskin?

Expert Solution

Ans 8.66%

	Investment	Tax Cost	After Tax Cost (Tax Cost*(1-Tax Rate)	Average Cost
Debt	30	7%	4.20%	1.26
Preferred Stock	10	8.00%	8.00%	0.80
Common Stock	60	11.00%	11.00%	6.60
	100	Total Cost	8.66

jeff jeffy answered 1 year ago

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Baskin Robbin Corporation's capital structure is 30% debt, 10% preferred, and 60% common equity. The company’s...

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