Calculating Capital Structure Weights

A firm has the following target capital structure with $19,898 of debt, $3,966 of preferred stock and $14,918 of equity. The after-tax cost of debt is 5.09%, the cost of preferred stock is 10.37% and the cost of common equity is 14.24%. The firm faces a tax rate of 40%. What will be the firms weight on equity capital?

(your answer should be in percentages so 10% would be entered as 10 or 10%)

hint: you need to first find the total amound of invested capital

Calculate WACC

The Weighted Average Cost of Capital is sometimes called the Opportunity Cost of Capital because there is a cost of using financing.

Calculate the opportunity cost of capital for a firm with the following capital structure: 30% preferred stock, 50% common stock and 20% debt.The firms has a cost of debt of 7.29%, a cost of preferred stock equal to 10.61% and a 13.97% cost of common stock. The firm has a 23% tax rate. You answer should be entered as a %, for example 15.48%

In this problem, you first need to calculate the cost of equity using the DCF approach. Then use the rest of the information to find the WACC:

Dashy-Paints Corporation has a target capital structure of 45% debt, 15% preferred stock, and 40% common stock. Its before-tax cost of debt is 8%, preferred stock cost is 9.5%, and its marginal tax rate is 40%. The current stock price is $22.00. The last dividend was at 2.25, and is expected to grow at a 5% constant rate. What is the firms WACC?

		12.04%
		8.72%
		11.32%
		9.88%