Weighted Average Cost of Capital Worksheet

XYZ Inc. has the following information: Total Market Value of Long-Term Debt: $900,000 Total Market Value of Preferred Stock: $30,000 Total Market Value of Common Stock: $1,500,000 Tax Rate= 21% YTM on Bonds= 7.8% Annual Preferred Dividend= $4.75 Preferred Stock Price= $41 Flotation Costs on Issuance of New Preferred Stock= 4% Next Years Expected Common Stock Dividend= $2.25 Current Common Stock Price= $49 Expected Dividend Growth Rate= 6.5%

Directions: 1) Compute the weight of debt, preferred stock, and common stock in the capital structure 2) Compute the cost of preferred stock 3) Compute the cost of common stock 4) Compute the Weighted Average Cost of Capital (WACC)