CNN’s capital structure is made of 50% ordinary shares; 30% preference share and 20% debt, cost of debt is 9 per cent. The risk-free rate is 3%, beta of CNN is 1.20 and the market risk premium is 12%. The current price of CNN preference share is $10 with a dividend of $1.25 a share. The corporate tax rate is 30%. Calculate CNN’s Weighed Average Cost of Capital (WACC).

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC we need to estimate the costs of the differen... View the full answer