Question
Cullumber Corporation is financed with debt, preferred equity, and common equity with market values of $20 million, $11 million, and $31 million, respectively. The betas
Cullumber Corporation is financed with debt, preferred equity, and common equity with market values of $20 million, $11 million, and $31 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 3.94 percent, the market risk premium is 6.03 percent, and Cullumbers average and marginal tax rates are both 30 percent.
Company cost of capital:
costs of debt = 5.146%
costs of common equity = 7.558%
costs of preferred equity = 10.573%
What is the companys weighted average cost of capital? (Round intermediate calculation to 4 decimal places, e.g. 1.2512 and final answer to 2 decimal places e.g. 5.21%.)
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