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Show all formulas and work Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal Debt 25% Preferred Stock 15%
Show all formulas and work
Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal | ||
Debt | 25% |
|
Preferred Stock | 15% |
|
Common Equity | 60% |
|
| 100% |
|
Tax Rate: 40% | ||
New capital can be obtained in the following ways: | ||
Preferred stock with a dividend of $11.00 can be sold at $95.00 per share
| ||
Debt can be sold at an interest rate of 12% (This is the Before Tax Cost of Capital) | ||
Cost of Equity (Answer given) = 16.26%
A. Calculate the after tax cost of debt? b Calculate the cost of preferred stock? c. Calculate WACC? |
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