ABC Ltd is producing baby toys. The cost of capital of the company is to be computed at the end of 2006 for evaluating investment proposals for 2007. The following data is available for the company: The corporate tax rate is 40%. Preference shares are being sold at their par value. The equity shareholders expect a return of 16% on their capital. The personal tax rate of the shareholders is 30%. The brokerage is 2%. Find out the weighted average cost of capital of the company.

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC of ABC Ltd we need to determine the costs of each source of financing and then weight them by their proportion in the companys capital structure ... View the full answer