08. Cost of capital Note: if there is no allocation to preferred stocks, you can ignore the component from preferred stocks. Weighted cost of capital tax rate 9% Firm 239,584.26 Amount % weight before-tax cost after-tax cost cost component after-tax cost weight weighted average cost of capital (WACC) Debt 239,415.00 99.93% 4.43% 0.04 0.04 Equity 169.26 0.07% 7.83% 0.08 0.00 Preferred 0.00 0.00% 66551.72% 665.52 0.00 4.02% 8-1 Weighted average cost of capital What does the WACC mean? I 1) The average cost of financing or hurdle rate for the business 2) The average return required by the capital providers 3) The opportunity cost for the capital providers