Barlett target capital status is 40% debt, 15% preferred and 45% common stock equity. The after tax debt is 6%, the cost of preferred is 7.5% and the cost of common reinvested earnings is 12.75%. The firm will not be issueing any new stock. Determine the cost of capital, what is the WACC? (10.12%, 9.54%, 9.83%, 8.98%, or 9.26%)
Barlett target capital status is 40% debt, 15% preferred and 45% common stock equity. The after tax debt is 6%, the cost of preferred is 7.5% and the cost of common reinvested earnings is 12.75%. The firm will not be issueing any new stock. Determine the cost of capital, what is the WACC? (10.12%, 9.54%, 9.83%, 8.98%, or 9.26%)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Barlett target capital status is 40% debt, 15% preferred and 45% common stock equity. The after tax debt is 6%, the cost of preferred is 7.5% and the cost of common reinvested earnings is 12.75%. The firm will not be issueing any new stock. Determine the cost of capital, what is the WACC? (10.12%, 9.54%, 9.83%, 8.98%, or 9.26%)
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Introduction
The required rate of return on an investment or capital budgeting project is called the cost of capital. It is calculated as a weighted average cost of capital which comprises equity, preferred and debt.
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