The calculation of WACC involves calculating the weighted average of the required rate of return of debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firms overall capital structure.

What is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation?

a. rd

b. re

c. rs

d.rp

2.

Mitchel Co. has 1.1 million of debt, $2 million of preferred stock and $2.1 million of common equity. What would be its weight on common equity?

a. 0.38

b. 0.21

c. 0.40

d. 0.34