1. What is the WACC for BearKat Autos (rounded to two decimal places, pick the closest one)? Instructor Hint: We have come a long way! Now we are ready to calculate the WACC. Here is the formula:

WACC = wdrd(1 T) + wprp + wcrs

Please read the following relevant information from the question to figure out the weights: "BearKat Autos has a target capital structure of 40% debt, 5% preferred stock and 55% common equity and their current tax rate is 25%."

Wd is the percentage of debt that the company plans to use. In our question, the weight on debt is 40% or 0.4. So Wd is 0.4. The weight on the preferred stock is 5% or 0.05. So the wp is 0.05. The weight on common equity is wc, which is 0.55.

And we have already known the rest of the variables from the previous steps. You should be able to calculate the WACC. Cheers! )