Please calculate the weighted average cost of capital
for a firm having a capital structure consisting of 40% debt, 10%
preferred stock and 50% equity.
Assume further that debt bears an interest of 8%, that
preferred stock pays an $8 dividend and is priced at $100 (its par
value), and that common stock sells for $55, paying a dividend of
$2.20.
Finally, assume that the expected growth rate of earnings
and dividends is 9%, and that the firm's effective tax rate is
34%.
Please calculate the weighted average cost of capital for a firm having a capital structure consisting of 40% debt, 10%
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