Problem 14-9 Calculating WACC [LO3] Ninecent Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 12 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 24 percent. a. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. 8.67% a. WACC b. Cost of debt 5.46 %
Problem 14-9 Calculating WACC [LO3] Ninecent Corporation has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 12 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 24 percent. a. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. 8.67% a. WACC b. Cost of debt 5.46 %
Chapter12: Capital Structure
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![Problem 14-9 Calculating WACC [LO3]
Ninecent Corporation has a target capital structure of 70 percent common stock, 5
percent preferred stock, and 25 percent debt. Its cost of equity is 12 percent, the cost of
preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax
rate is 24 percent.
a. What is the company's WACC? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
8.67%
a. WACC
b. Cost of
debt
5.46 %](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0c983315-572f-4e29-9a5b-7b948d4974f2%2F1a07b472-b550-4172-8b79-3b713e7c5a91%2Fygfw9gr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 14-9 Calculating WACC [LO3]
Ninecent Corporation has a target capital structure of 70 percent common stock, 5
percent preferred stock, and 25 percent debt. Its cost of equity is 12 percent, the cost of
preferred stock is 6 percent, and the pretax cost of debt is 7 percent. The relevant tax
rate is 24 percent.
a. What is the company's WACC? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
8.67%
a. WACC
b. Cost of
debt
5.46 %
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