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Calculate the weighted average cost of capital

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Reference no: EM13530588

Cost of Capital;
A new $100 million project will be financed with:

$35 million Bonds issued at par that pay annual 8% coupons;
$30 million Preference shares costing 12% per annum before tax;
Remainder Equity costing 17% per annum.

The company also has an overdraft of $5 million that costs 10% before tax. The company's average tax rate is 30% and the marginal tax rate is 40%. Calculate the weighted average cost of capital (WACC) for the project.

Reference no: EM13530588

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