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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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