Question
Your company is capitalized as follows: Bank loan of $3B at an 8% annual effective interest rate; Preferred Stock of $2B at a 10% annual
Your company is capitalized as follows: Bank loan of $3B at an 8% annual effective interest rate; Preferred Stock of $2B at a 10% annual dividend rate; Common Stock with a market cap of $3B. You estimate your shareholder's Ke (cost of equity or required rate of return) is 17%. Your effective tax rate is 40%. What is your after-tax WACC?
11.88% 8.25% 11.35% 10.68% 13.75%
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Principles of Financial Accounting
Authors: Belverd E. Needles, Marian Powers
12th edition
978-1133940562, 1133940560, 978-1285608464, 1285608461, 1133939287, 978-0357693605, 978-1285607047, 128560704X, 978-1133939283
