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Weighted Average Cost of Capital, WACC: Assume in the future Allied will raise new capital according to their target capital structure, le. 45% debt, 2%
Weighted Average Cost of Capital, WACC: Assume in the future Allied will raise new capital according to their target capital structure, le. 45% debt, 2% preferred stock, and 53% common equity. Using the previously calculated cost of each component of capital, (1) what will be Allied's WACC if it does not issue any new stock, i.e. common equity is all internal equity, from retained earnings? (2) what will be Allied's WACC if it issues new stock to raise common equity, i.e. common equity is all external equity, from new common stock? Weighted Average Cost of Capital, WACC: Assume in the future Allied will raise new capital according to their target capital structure, le. 45% debt, 2% preferred stock, and 53% common equity. Using the previously calculated cost of each component of capital, (1) what will be Allied's WACC if it does not issue any new stock, i.e. common equity is all internal equity, from retained earnings? (2) what will be Allied's WACC if it issues new stock to raise common equity, i.e. common equity is all external equity, from new common stock
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