Given the following information, calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order shown in Table 11-1.

Percent of capital structure:
Debt.......................................................35%
Preferred stock ...... . .. .. ... ......... . .. . .10
Common equity .......................... . .......55
Additional information:
Bond coupon rate ......................... .......13%
Bond yield .......................... . . .. . .........11%
Dividend, expected common ........ . .$3.00
Dividend, preferred..........................$10.00
Price, common ......... . .. .. . ......... . $50.00.
Price, preferred ............ . . ..... . .. . .$98.00
Flotation cost, preferred .......... .. .. . .$5.50
Corporate growth rate .................. .. .. . .8%
Corporate tax rate .............. .................30%

Table 11.1

Transcribed Image Text:

Cost Weighted (after tax) Weights cost 1.97% 1.09 6.55% к, 10.94 30% 10 Debt.. Preferred stock. Common equity (retained earnings) Weighted average cost of capital ... к 12.00 к. к, 60 7.20 10.26%