Finance homework

Business & Finance
Tutor: None Selected Time limit: 1 Day

A company is looking to invest in new production machinery. The market value of common stock is $44 million, the market value of preferred stock is $9 million, and the market value of total debt is $33 million. Analysts have calculated the cost of common equity to be 16%, the cost of preferred equity to be 12%, and the cost of debt to be 9.5%. what is the weighted average cost of capital if the marginal tax rate is 34%? How do I calculate this?  

Dec 3rd, 2015

Thank you for the opportunity to help you with your question!

.095* .3837 (1-.34) + .16 * .5116 + .12 *.1047 =11.85%

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Dec 3rd, 2015

where did .3837, .5116, .12 come from?

Dec 3rd, 2015

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