1. DB Quill has an optimal capital structure that is 40% common equity & 40% debt. DB's pretax cost of equity is 11.5%. Its pretax cost of preferred stock is 8.8%, and its pretax cost of debt is 6.9%. If the corporate tax rate is 35%, what is the weighted average cost of capital? 

2. Given an optimal capital structure that is 30% debt and 70% common stock, calculate the weighted average cost of capital given the following additional information: Bond coupon rate 10%, with 10 years left to maturity trading at $1100 today. Last dividend paid $3.67 Common stock price $75 Constant growth rate 9% Tax rate 40% 

3. A firm's preferred stock carries a dividend rate of 10% on a par value of $100 which is selling for $89.70. Flotation cost is estimated at $5 per share. What is the after-tax cost of preferred stock if the firm's tax rate is 34%?

Answer rating: 100% (QA)

1 To calculate the weighted average cost of capital WACC we first need to find the aftertax cost of each component of capital equity preferred stock a... View the full answer