The calculation of a firm's weighted, or overall, cost of capital involves calculating the weighted average of the required rates of return on the company's debt and preferred and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. The general formula for the computation of a firm's weighted cost of capital is: E ka [G (E+ B+ Pry) * ke] B + [G (E+ B + Pf) -) x kg x (1 - 1)] PF + [G (E+ B + PF) -) x kp] where, E = ka = the firm's weighted marginal cost of capital the dollar amount of in the firm's target capital structure = the after-tax cost of the firm's internal common equity (retained earnings) B = the dollar amount of in the firm's target capital structure kd = the cost of the firm's debt capital T = the firm's tax rate Pp = the dollar amount of in the company's target capital structure kp cost of the firm's preferred stock capital Tang Company has a target capital structure that consists of $2.4 million of debt capital, $4.0 million of preferred stock financing, and $3.2 million of common equity. The corresponding weights of its debt, preferred stock, and common equity financing that should be used to compute its weighted cost of capital (rounded to the nearest wo decimal places) are: 25.00%, 41.67%, and 33.33%, respectively 33.33%, 25.00%, and 41.67%, respectively 47.92%, 29.58%, and 22.50%, respectively 29.58%, 22.50%, and 47.92%, respectively Consider the following case: The calculation of a firm's weighted, or overall, cost of capital involves calculating the weighted average of the required rates of return on the company's debt and preferred and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. The general formula for the computation of a firm's weighted cost of capital is: E ka [G (E+ B+ Pry) * ke] B + [G (E+ B + Pf) -) x kg x (1 - 1)] PF + [G (E+ B + PF) -) x kp] where, E = ka = the firm's weighted marginal cost of capital the dollar amount of in the firm's target capital structure = the after-tax cost of the firm's internal common equity (retained earnings) B = the dollar amount of in the firm's target capital structure kd = the cost of the firm's debt capital T = the firm's tax rate Pp = the dollar amount of in the company's target capital structure kp cost of the firm's preferred stock capital Tang Company has a target capital structure that consists of $2.4 million of debt capital, $4.0 million of preferred stock financing, and $3.2 million of common equity. The corresponding weights of its debt, preferred stock, and common equity financing that should be used to compute its weighted cost of capital (rounded to the nearest wo decimal places) are: 25.00%, 41.67%, and 33.33%, respectively 33.33%, 25.00%, and 41.67%, respectively 47.92%, 29.58%, and 22.50%, respectively 29.58%, 22.50%, and 47.92%, respectively Consider the following case
