A firm is raising funds by selling a package of equity, debt and preferred stock.

The details of the package are:

1) Equity sold for $20 million. Expected perpetual dividends to buyers is $2 million per year.

2) Preferred stock sold for $10 million. Expected perpetual dividends to buyers 7.10% per year.

3) Debt sold for $29.45, perpetual risk-less (guaranteed) coupon payments to be $1.5 million a year.

Assume no taxes and other Modigliani-Miller assumptions also hold.

What is the WACC for the firm?

Please express your answer as a percentage.

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC you can use the following formula WACC EVRe ... View the full answer