The company's bonds with a 5% coupon are trading to yield 7.5% before tax. The company's preferred stock pays an annual dividend of $5.00 and trades at $55.00 per share. The beta for the company's stock is 1.35. The expected return for the market is 10.5% and the risk-free rate is 4%. The company is in a 21% marginal tax bracket. The respective weights for the three securities, based on market values is debt, 40%; preferred 10%; and common stock, 50%.

What is the company's weighted average cost of capital (WACC)?

Answer rating: 100% (QA)

To calculate the weighted average cost of capital WACC we need to find the cost of each component of ... View the full answer