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Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two diffe capital structures under
Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two diffe capital structures under consideration to fund a new project. Assume the company's tax rate is 30%. Tax Rate Cost of Capital 8% 30% F || Component Debt Preferred Stock Common Stock Total Scenario 1 $4,000,000.00 1,200,000.00 1,000,000.00 $6,200,000.00 Scenario 2 $1,000,000.00 1,500,000.00 3,700,000.00 $6,200,000.00 10% 13% . AE 1-a. Complete the table below to determine the WACC for each of the two capital structure scenarios. (Enter your answer as a percentage rounded to 2 decimal places (e.g. .3555 should be entered as 35.55).) Scenario 2 Weight % Cost of Capital Scenario 1 Weight % 64.52% Tax Rate Scenario 1 Scenario 2 Weighted Cost Weighted Cost 16.13% Debt 8% 30% Preferred Stock 19.85% 24. 19% 10% Common Stock 16.13% 59 68% 13% Total 100.00% 0.00%
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