Calculating a company wacc

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When calculating a company's WACC, should book value, market value, or target weights be used? Explain.

Suppose Firm A plans to retain $100 million of earnings for the year. It wants to finance its capital budget using a target capital structure of 46% debt, 3% preferred, and 51% common equity. How large could its capital budget be before it must issue new common stock?

A company has outstanding 20-year noncallable bonds with a face value of $1,000, an 11% annual coupon, and a market price of $1,294.54. If the company was to issue new debt, what would be a reasonable estimate of the interest rate on that debt? If the company's tax rate is 40%, what is its after-tax cost of debt?

Name three factors that affect the cost of capital and that are beyond the firm's control.

Reference no: EM132953076

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