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Given the information provided here, what is this firm's WACC? YTM on company bonds = 5.0% preferred shareholders require = 6.0% return company tax rate
Given the information provided here, what is this firm's WACC?
- YTM on company bonds = 5.0%
- preferred shareholders require = 6.0% return
- company tax rate = 30%
- common shareholders require = 12% return
- total long-term debt = $650 million
- total shareholders' equity = $350 million
- total preferred equity = $100 million
I will give you some tips:
WACC = Kd(Wd) + Kp(Wp) + Ke(We)
Kd = cost of debt capital
Wd = % of debt in long-term (LT) capital structure
Kp = cost of preferred shares (if any)
Wp = % of preferred shares in LT capital structure
Ke = cost of common equity capital
We = % of common equity in LT capital structure
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