Question: Common Stock (with beta 1.2) $7,000,000 Debt $3,000,000 Preferred Stock (Price $100 per share; flotation cost $2 per share) $2,000,000 Yield to Maturity 6% Corporate
| Common Stock (with beta 1.2) | $7,000,000 |
| Debt | $3,000,000 |
| Preferred Stock (Price $100 per share; flotation cost $2 per share) | $2,000,000 |
| Yield to Maturity | 6% |
| Corporate tax rate | 30% |
| Preferred stock dividend | $4 |
| Risk free rate | 5% |
| Market rate of return | 12% |
Required:
Given the above information, calculate the weighted average cost of capital (WACC) for Big Mart Inc.
Why it is important for Big Mart Inc. to calculate WACC?
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