Question
Carla Vista Corporation is financed with debt, preferred equity, and common equity with market values of $22 million, $12 million, and $32 million, respectively. The
Carla Vista Corporation is financed with debt, preferred equity, and common equity with market values of $22 million, $12 million, and $32 million, respectively. The betas for the debt, preferred stock, and common stock are 0.2, 0.6, and 1.1, respectively. The risk-free rate is 3.90 percent, the market risk premium is 6.04 percent, and Carla Vistas average and marginal tax rates are both 30 percent. What is the companys cost of capital? (Round intermediate calculation to 4 decimal places, e.g. 1.2512 and final answers to 3 decimal places e.g. 5.215%.) The Questions: 1. Costs of debt ____ % 2. Costs of common equity ___ % 3. Costs of preferred equity ___ % 4. What is the companys weighted average cost of capital? MY ANS for Q 1-3: 3.58, 10.54, 7.52 (all in %) Results: WRONG.......WHY? And what is the company's weighted average cost of capital? (rounded to two decimal places)
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