Capital Co. has a capital structure, based on current market values, that consis

Question

Capital Co. has a capital structure, based on current market values, that consists of 35 percent debt, 6 percent preferred stock, and 59 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 14 percent for the debt, preferred stock, and common stock, respectively, what is Capital%u2019s after-tax WACC? Assume that the firm%u2019s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) After tax WACC = %

Explanation / Answer

After tax WACC =9*0.60*0.35 + 11*0.06 + 14*0.59 = 10.81 %

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