1. Problem 13.11
Capital Co. has a capital structure, based on current market
values, that consists of 50 percent debt, 10 percent preferred
stock, and 40 percent common stock. If the returns required by
investors are 8 percent, 10 percent, and 15 percent for the debt,
preferred stock, and common stock, respectively, what is
Capital’s after-tax WACC? Assume that the firm’s marginal tax
rate is 40 percent.
(Round intermediate calculations to 4 decimal places, e.g.
1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
After tax WACC
=
.
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