Question: The long-term debt and current liabilities have a before tax cost of 24% and 26% respectively. XYZ Ltd's preference stock dividend rate is 20%, the

The long-term debt and current liabilities have a before tax cost of 24% and 26% respectively. XYZ Ltd's preference stock dividend rate is 20%, the beta of the firm's stock is 1.30, the average market return is 34% and the risk-free rate is 16%. Calculate WACC using book values and market values when tax is 35%.

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To calculate the weighted average cost of capital WACC we need to determine the proportion of each source of financing in the companys capital structure and multiply it by its respective cost of capit... View full answer

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